UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
March 21, 2002
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FLOWSERVE CORPORATION
(Exact name of registrant as specified in the charter)
New York 001-13179 31-0267900
(State of other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
222 W. Las Colinas Blvd., Suite 1500, 75039
Irving, Texas (Zip Code)
(Address of principal executive offices)
(972) 443-6500
Registrant's telephone number, including area code
Item 5. Other Events
On March 21, 2002, Flowserve Corporation (the "Company") entered into a
Purchase and Sale Agreement (the "Purchase and Sale Agreement") with Invensys
plc (the "Seller") pursuant to which the Company will acquire the Flow Control
Division (IFC) of Seller for US$ 535 million, subject to certain purchase price
adjustments. A copy of the Purchase and Sale Agreement is attached hereto as
Exhibit 2.1 and is incorporated herein by this reference.
Item 7. Financial Statements and Exhibits
(a) Financial Statements.
None.
(b) Pro Form Financial Information.
None.
2
(c) Exhibits.
2.1 Purchase and Sale Agreement dated as of March 21, 2002 by and between
Flowserve Corporation and Invensys plc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Flowserve Corporation
Dated: March 28, 2002
By: /s/ Ronald F. Shuff
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Name: Ronald F. Shuff
Title: Vice President, Secretary and
General Counsel
EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT, dated as of March 21, 2002 (this
"Agreement"), by and between Invensys plc, a corporation organized under the
laws of England and Wales, having its registered office at Invensys House,
Carlisle Place, London, SW1P 1 BX ("Seller") and Flowserve Corporation, a New
York corporation having a principal place of business at 222 W. Las Colinas
Blvd., Suite 1500, Irving, Texas, 75039 ("Purchaser").
WHEREAS, Seller, the Purchased Subsidiaries (as defined in Section
8.2) and the Business Divisions (as defined in Schedule 1.1(a)(ii)) are engaged
in the line of business comprised of the manufacture, design and sale of
actuators, valves and controls for the industrial flow control market and the
design and sale of steam system products for the industrial flow control market
(such line of business as conducted by Seller, the Purchased Subsidiaries and
the Business Divisions, the "Business");
WHEREAS, the subsidiaries of the Seller set forth in column one of
Schedule 1.1(a)(i) are the registered and beneficial owners of 100% (unless
otherwise indicated in Schedule 1.1(a)(i)) of the share capital or other
ownership interests of those companies set forth opposite their names in column
two of Schedule 1.1(a)(i) (such entities set forth in column two of Schedule
1.1(a)(i), the "Target Subsidiaries");
WHEREAS, Seller, the Business Divisions and certain other Affiliates
of Seller (other than the Purchased Subsidiaries) are owners of the Target
Assets (as defined in Schedule 1.1(a)(ii));
WHEREAS, as of the date of this Agreement, the Seller, the subsidiaries
set forth in column one of Schedule 1.1(a)(i), the Business Divisions and the
other Affiliates of the Seller owning Target Assets (collectively, the "Seller
Group") and the Purchased Subsidiaries together, directly or indirectly, carry
on and own or include all of the assets used in, held for use in, or pertaining
to the Business and will carry on and own or include all of the assets used in,
held for use in, or pertaining to the Business at the Closing Date (as defined
in Section 5.1(a)); and
WHEREAS, Seller Group desires to sell or to cause to be sold in
accordance with this Agreement to Purchaser, or Affiliates (as defined below) of
Purchaser designated by Purchaser as purchasers of the Target Assets (the
"Business Purchasers") or as purchasers of the Target Subsidiaries (the "Share
Purchasers," and, together with the Business Purchasers, the "Purchaser
Designees," such Purchaser Designees in each case to be identified in writing to
Seller not less than ten Business Days prior to the Closing Date) and Purchaser
desires to purchase, or have the Purchaser Designees purchase, from Seller and
other members of the Seller Group subject to the assumption by Purchaser or the
Purchaser Designees of certain liabilities of Seller and the Seller Group
relating to the Business, on the terms and conditions hereinafter set forth, all
of the outstanding shares of common stock or other ownership interests of the
Target Subsidiaries and all of the Target Assets.
In consideration of the premises and of the mutual agreements
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I.
Purchase and Sale
1.1. SALE OF THE BUSINESS:
(a) On the terms and subject to the conditions set forth in this Agreement,
Seller shall, or shall cause certain members of the Seller Group to, sell,
transfer, convey, assign and deliver to Purchaser or such Purchaser Designee as
Purchaser may direct and Purchaser agrees to, or to cause a Purchaser Designee
to, purchase, assume and accept from Seller or certain members of the Seller
Group, free and clear of all Encumbrances (as defined below), except for
Permitted Liens (as defined in Section 5.1(c)(ii)), all of its title and
interest in and to, all of the shares of capital stock and other ownership
interests of the Target Subsidiaries as set out in Schedule 1.1(a)(i), together
with the Target Assets.
(b) The shares of stock and other ownership interests listed on Schedule
1.1(a)(i) and the Target Assets, which, except to the extent set forth on
Schedule 1.1(a)(ii), together comprise all of the assets used in, held for use
in, or pertaining to, the Business by Seller or its affiliates, shall be
collectively referred to as the "Purchased Assets." As used in this Agreement,
the term "Encumbrances" means, collectively, all security interests, charges,
judgments, liens (other than for Taxes (as defined in Section 17.10(e)) not yet
due and payable), pledges, restrictions, escrows, Claims (as defined below),
options, rights of first refusal, mortgages and encumbrances; the term "Claim"
means any claim, demand, action, suit or proceeding; the term "Affiliate" means
any other person or entity that, directly or indirectly, controls or is
controlled by or is under common control with such person; the term "control"
means the power to direct the management and policies of a person directly or
indirectly, whether through the ownership of voting securities, or by contract
or otherwise; and the term "person" means any individual, corporation,
partnership, limited liability corporation, limited duration company, joint
stock company, unincorporated association, trust, joint venture or other entity
or organization, or government or any political subdivision or agency thereof.
1.2. EXCLUDED ASSETS: There are excepted from the Purchased Assets and the term
"Purchased Assets" does not mean or include the following assets (collectively,
the "Excluded Assets"):
(a) cash and cash equivalent items of the Seller or its Affiliates on hand
or on deposit and bank accounts as of the Closing Date, except to the extent
taken into account in determining the Final Cash/Overdraft Debt Balance pursuant
to Section 4.4;
(b) all Permits (as defined in Section 8.9(b)), to the extent they are not
assignable or transferable;
(c) all rights to or claims for refunds, overpayments, prepayments or
rebates of Taxes and other governmental charges of Seller and its Affiliates
(other than the Purchased Subsidiaries) and the benefit of net operating loss or
capital loss carryforwards or carrybacks,
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Tax credits, Reliefs (as defined in Section 17.10(e)), allowances or other Tax
attributes (of whatever nature) of Seller and its Affiliates (other than the
Purchased Subsidiaries);
(d) all insurance policies, excluding any insurance policies obtained
directly by the Purchased Subsidiaries to which no other member of Seller Group
is a party;
(e) except as set forth in Section 15.9, the right to use the name(s)
"Invensys," "Siebe," "BTR" and "Foxboro" (alone or in combination with other
words, terms and/or designs or variations of such words, terms or designs) and
the related registered and unregistered trademarks, service marks and logos (the
"Retained Names"), and, for the avoidance of doubt, the right to use, register
and apply to register the "Argus" trademarks as set forth in Section 15.9 and on
Schedule 15.9;
(f) all assets of Seller and its Affiliates (other than the Purchased
Subsidiaries) not used in, held for use in or pertaining to the Business as it
is currently conducted;
(g) all assets relating to Seller Benefit Plans (as hereinafter defined)
that are not expressly assumed by Purchaser or its Affiliates pursuant to
Article XII hereof;
(h) all assets related to administrative and headquarters functions
(including, without limitation, assets related to the treasury, tax and legal
functions);
(i) the assets listed on Schedule 1.2;
(j) all rights to indemnification in Sections 7.1(c) (to the extent arising
out of the Retained Liabilities described in Section 2.3(j)) and (f)
(Indemnification by Limitorque Corporation and American Manufacturing
Corporation) and 7.6 (Indemnification for Specific Environmental Matters) as set
forth in the Asset Purchase Agreement by and among American Manufacturing
Corporation; Limitorque Corporation; Limitorque of Canada, Ltd.; LT Acquisition
Company, Inc.; Edward Valves, Inc.; BTR Industries, Ltd.; BTR (European
Holdings) B.V.; BTR Australia Pty. Ltd.; and Canadian Worcester Controls
Limited, dated August 1, 1997 (the "Limitorque Indemnity");
(k) all rights (including without limitation, all rights to (A) any
payments and (B) the performance of any investigatory and remedial actions, in
each case, by Rockwell International Corporation ("Rockwell")) set forth in the
Addendum to Asset Sale Agreement between BTR Dunlop, Inc.; BTR, Inc.; BTR North
America, Inc.; Measurement & Flow Control, Inc.; M&FC Property, Inc.; M&FC
Service Co., Inc.; BTR Precision Die Casting, Inc.; McCanna, Inc., BTR Valve
Sealants, Inc.; Equimeter Incorporated; Nordstrom Valves, Inc.; Sensus
Technologies, Inc.; Smith Blair, Inc.; Edward Valves, Inc., Weavexx Corporation
(formerly Huyek Canada, Ltd.) and BTR Valves S.A. and Rockwell, dated January
10, 1995 (the "Rockwell Addendum");
(l) the real property located at Walsroder Str. 9, 11, 13 and 15, Munchner
Str. 67, 77 and 79 and Hemmstr 130 in Bremen, Germany and any lease relating
thereto;
(m) the real property located at 8411 Hacks Cross Road, Olive Branch,
Mississippi; and any lease relating thereto; and
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(n) all assets related to the APC-T&K Litigation (as defined on Schedule
2.2(h)).
ARTICLE II.
Liabilities
2.1. ASSUMPTION OF LIABILITIES: On the terms and subject to the conditions of
this Agreement, on and effective as of the Closing Date, Seller Group shall
assign to Purchaser, and Purchaser (a) shall, except as set forth in Section
2.2, assume and agree to perform and discharge all of the liabilities and
obligations relating to the Business (which liabilities and obligations being
assumed by Purchaser shall include any guarantees of liabilities and obligations
relating to the Business) of Seller Group, and (b) acknowledges that unless
otherwise provided by the terms of this Agreement the Purchased Subsidiaries
remain responsible for their respective liabilities and obligations. Without
limiting the generality of the foregoing, the liabilities and obligations
retained by the Purchased Subsidiaries and/or assumed by Purchaser include,
without limitation, the following:
(a) all obligations for the sale and delivery of products not shipped prior
to the Closing Date under open sales orders, open bids and sales contracts
included in the Assigned Contracts or otherwise, which were accepted or made in
the ordinary course of business of the Business prior to the Closing Date;
(b) all obligations for the purchase of raw materials, supplies and repair
and maintenance materials not received prior to the Closing Date or received
prior to the Closing Date and not paid for prior to the Closing Date under open
supply contracts, purchase orders and commitments included in the Assigned
Contracts or otherwise, which were given or made in the ordinary course of
business of the Business;
(c) all liabilities and obligations arising under the Assigned Contracts in
accordance with their respective terms, including, without limitation, payables
owed by the Business to Seller or any of its Affiliates on the Closing Date for
goods sold and delivered in the ordinary course;
(d) all liabilities and obligations that are made the responsibility of
Purchaser and its Affiliates under Article XII of this Agreement;
(e) all liabilities for suits, claims, proceedings and actions made or
commenced on or after the Closing Date resulting from actual or alleged harm,
injury or damage to persons, properties or businesses by products shipped or
sold by the Business ("Products") on or after the Closing Date;
(f) all liabilities for express or implied warranties of the Business,
including obligations to repair, replace, rework or to make refunds of amounts
paid for Products regardless of when such Products were manufactured, sold or
distributed or when defects became or become apparent;
(g) all liabilities and obligations for the recall, notification, retrofit
or other post-manufacture remedial or corrective actions relating to Products,
regardless of when such Products were manufactured, sold or shipped;
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(h) all liabilities and obligations for all other claims, actions, suits,
proceedings or investigations arising out of events occurring after the Closing
Date involving the operations of the Business; and
(i) all liabilities and obligations arising out of or resulting from the
conduct of the Business occurring subsequent to the Closing Date, including
without limitation, liabilities and obligations arising under Environmental
Laws.
The foregoing liabilities and obligations of Seller and Seller Group being
assumed by Purchaser hereunder shall be collectively referred to as the "Assumed
Liabilities."
2.2. RETAINED LIABILITIES: Seller shall retain, and shall remain exclusively
responsible for paying, performing and discharging when due and shall defend and
indemnify Purchaser and its affiliates with respect to, and Purchaser shall not
assume or have any responsibility for:
(a) "Retained Tax Liabilities," shall consist of the following: (i) all
liabilities and obligations for Taxes of Seller and the Seller Group and their
Affiliates arising out of or relating to the operation or ownership of the
Business or the Target Assets prior to and including the Closing Date, (ii) any
Tax liability incurred solely in connection with any Excluded Asset, (iii) all
liabilities and obligations of Seller or any member of the Seller Group under
any Tax sharing agreement, Tax indemnity agreement or other similar agreement or
practice relating to Taxes to which it is a party prior to and including the
Closing Date, and (iv) all liabilities and obligations of Seller or any member
of the Seller Group incurred as a result of Seller or such member of the Seller
Group filing a Tax Return as part of a Consolidated Group, in each case that are
not obligations or liabilities of the Purchased Subsidiaries;
(b) all liabilities and obligations that are made the responsibility of
Seller and Seller Group and their Affiliates under Article XII of this
Agreement;
(c) any liability or obligation of Seller and the Seller Group under this
Agreement or, except as otherwise provided in this Agreement, on account of any
of the transactions contemplated hereby, including, without limitation, any
liability or obligations of Seller and the Seller Group to attorneys,
accountants, brokers, or others for services rendered or expenses incurred by or
on behalf of Seller and the Seller Group;
(d) except as otherwise provided in this Agreement, any liability which
would arise as either a result of a breach of any of Seller's representations
and warranties hereunder, or a breach of any of Seller's covenants or agreements
hereunder;
(e) any indebtedness of Seller Group or the Purchased Subsidiaries for
borrowed money in existence as of the Closing Date, except to the extent taken
into account in determining the Final Cash/Overdraft Debt Balance pursuant to
Section 4.4;
(f) any liability or obligation for Asbestos Claims and PCB Claims, in each
case, with respect to products manufactured, used or sold on or before the
Closing Date;
(g) all liability for product liability claims for products sold or
distributed prior to Closing Date;
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(h) any liabilities or obligations of Seller or any Affiliate of Seller
(including any Purchased Subsidiary) relating to, resulting from or arising out
of the Proceedings set forth on Schedule 2.2(h) hereto;
(i) all liabilities and obligations under the Limitorque Indemnity;
(j) all liabilities and obligations under the Rockwell Addendum;
(k) except as otherwise contemplated by the arrangements described in
Section 7.17, all liabilities and obligations with respect to the assets
described in Section 1.2(l) and 1.2(m);
(l) all liabilities and obligations with respect to dividends declared but
unpaid as of the Closing by any Purchased Subsidiary, except to the extent
required to be paid to any Purchased Subsidiary.
"Asbestos Claims" shall mean all present or future lawsuits, claims and actions
premised upon the presence of asbestos in, on or about products (including the
packing or packaging materials associated therewith) manufactured or sold on or
before the Closing by any member of the Seller Group or their respective
predecessors in connection with the Business, the Target Assets or the Purchased
Subsidiaries or the release, movement, migration or emanation of asbestos from
such products, and regardless of how the claim may be styled or pleaded,
regardless of whether the claim is for environmental injury, personal injury,
injury to property, remediation, replacement, repair or other relief, and
regardless of the party against whom the claim is made.
"PCB Claims" shall mean all present or future lawsuits, claims and actions
premised upon the presence of PCBs in, on or about products manufactured or sold
on or before the Closing by any member of the Seller Group or their respective
predecessors in connection with the Business, the Target Assets or the Purchased
Subsidiaries or the release, movement, migration or emanation of PCBs from such
products, and regardless of how the claim may be styled or pleaded, regardless
of whether the claim is for environmental injury, personal injury, injury to
property, remediation, replacement, repair or other relief, and regardless of
the party against whom the claim is made.
The liabilities and obligations of Seller and Seller Group that do not
constitute Assumed Liabilities and which will be retained by Seller and Seller
Group hereunder shall be collectively referred to as the "Retained Liabilities."
ARTICLE III.
Purchase Price
3.1. PURCHASE PRICE: The purchase price payable by Purchaser to Seller for the
Purchased Assets (the "Purchase Price") shall be $535 million in cash (of which
$35 million is in consideration of the entry into the Non-Competition Agreement
by Seller) minus the Net Inter-Company Payables Amount, if such amount is
greater than zero, or plus the Net Inter-Company Payables Amount if such amount
is less than zero (the "Cash Purchase Price"), plus the assumption of the
Assumed Liabilities, subject to adjustment as provided in Article IV of this
Agreement. The Purchase Price does not include any amounts in respect of any
value added Taxes or Transfer Taxes or any other similar or equivalent Taxes
imposed by any jurisdiction (all of which Taxes shall be governed by the
provisions of Section 17.4 and Section 17.7).
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3.2. PAYMENT AT CLOSING: At the Closing, Purchaser shall transfer to a bank
account designated in writing by Seller, such designation to be delivered to
Purchaser no later than three Business Days prior to the Closing:
(a) the Cash Purchase Price referred to in Section 3.1;
(b) plus the Net Inter-Company Payables Amount, if such amount is greater
than zero, or minus the Net Inter-Company Payables Amount if such amount is less
than zero (collectively, the "Closing Payment").
3.3. PURCHASE PRICE ALLOCATION:
(a) Seller and Purchaser have agreed to a preliminary allocation of the
Purchase Price set forth in Section 3.1 (excluding for this purpose any Assumed
Liabilities, the Net Inter-Company Payables Amount, and any other relevant items
that are properly treated for Tax purposes as additional purchase price paid by
Purchaser and the Purchaser Designees pursuant to this Agreement but that were
not capable of being estimated prior to the date hereof) among the Purchased
Assets as set forth on Schedule 3.3 (the "Preliminary Allocation").
(b) Prior to the Closing, Seller and Purchaser shall together and in good
faith agree on the allocation of the amounts set forth on the Preliminary
Allocation to the Target Assets and stock of the Purchased Subsidiaries for
which stamp duty is payable in order to effect the conveyance of the foregoing
to Purchaser or the Purchaser Designees (as applicable) (the "Stamp Duty
Allocation").
(c) Within 30 calendar days after final determination of the adjustments to
the Purchase Price under Article IV, Seller and Purchaser shall together and in
good faith agree on (i) the total purchase price of the Purchased Assets for Tax
purposes (including for this purpose any Assumed Liabilities, the Net
Inter-Company Payables Amount, adjustments to the Purchase Price made pursuant
to Article IV and any other relevant items that are properly treated for Tax
purposes as purchase price for the Purchased Assets paid by Purchaser and the
Purchaser Designees pursuant to this Agreement), (ii) the adjustments to the
Preliminary Allocation that are required by reason of such Assumed Liabilities,
the Net Inter-Company Payables Amount, adjustments to the Purchase Price made
pursuant to Article IV and other relevant items that are properly treated for
Tax purposes as purchase price for the Purchased Assets paid by Purchaser and
the Purchaser Designees pursuant to this Agreement (the Preliminary Allocation
as so adjusted, the "Final Allocation"), and (iii) with respect to each
Purchased Subsidiary that immediately prior to the Closing is a U.S. LLC that is
classified as an entity disregarded as separate from its sole owner under
section 301.7701-3(b)(1) of the U.S. Treasury Regulations, the total purchase
price for Tax purposes of the assets of such Purchased Subsidiary and an
allocation of such total purchase price among the assets of such Purchased
Subsidiary (the "LLC Allocation"), in each case, in a manner consistent with the
Purchase Price set forth in Section 3.1, the Preliminary Allocation, the Stamp
Duty Allocation, the adjustments to the Purchase Price made pursuant to Article
IV and the applicable Tax Laws (including, without limitation, Section 1060 of
the Code and the U.S. Treasury Regulations thereunder) and based on the
Purchased Assets to which such Assumed Liabilities, Net Inter-Company Payables
Amount, adjustments to the Purchase Price and other relevant items are
attributable.
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(d) Seller and Purchaser shall together and in good faith agree on any
subsequent adjustment to the total purchase price of the Purchased Assets for
Tax purposes, the Final Allocation and the LLC Allocations (as the case may be)
that is required by reason of any indemnification payment or other payment made
pursuant to this Agreement based on the Purchased Asset to which such payment is
attributable and in accordance with applicable Tax Laws, within 15 calendar days
of such indemnification payment or other payment being made pursuant to this
Agreement.
(e) Seller and Purchaser shall cooperate and negotiate in good faith to
resolve any disputes concerning any of the items described in subsection (b),
(c) or (d) of this Section 3.3 within the specified time period, provided,
however, that if Seller and Purchaser ultimately are unable to agree with
respect to any of such items within the specified time period, no later than ten
calendar days after the end of the specified time period, the items in dispute
shall be referred to a single Independent Firm, mutually selected and jointly
engaged, by the parties, for resolution by the Independent Firm. "Independent
Firm" shall mean either KPMG LLP or Deloitte & Touche LLP, or, if each of those
firms is unwilling to act, such other nationally recognized independent public
accounting firm as shall be agreed upon by the parties hereto in writing. The
Independent Firm shall be instructed to notify Seller and Purchaser in writing
of its resolution of such disputed items within fifteen Business Days of such
referral, that the Independent Firm's review shall be strictly limited to such
disputed items and that its resolution of such disputed items must be consistent
with the Preliminary Allocation and all of the items described in subsections
(b), (c) and (d) of this Section 3.3 to which the parties have agreed. The
Independent Firm's resolution of such disputed items shall be conclusive, final
and binding on Seller and Purchaser and their respective Affiliates for all Tax
purposes and the Final Allocation and the LLC Allocations shall be adjusted to
reflect such resolution. The expenses and fees of the Independent Firm incurred
in connection with such dispute shall be borne by Seller and Purchaser in
inverse proportion as they may prevail on disputed items resolved by the
Independent Firm, which proportionate allocations shall also be determined by
the Independent Firm at the time the determination of the Independent Firm is
rendered on the disputed items.
(f) The Final Allocation and the LLC Allocations, as finally determined
under this Section 3.3 and as adjusted from time to time under subsection (d) of
this Section 3.3, shall be final and binding on Seller and Purchaser (and their
respective Affiliates, including the Purchased Subsidiaries) for all Tax
purposes (including, without limitation, for purposes of the preparation and
filing of Tax Returns, subject to adjustment to reflect Seller's selling
expenses as a reduction in sales proceeds and Purchaser's acquisition expenses
as an adjustment to purchase price), and Seller and Purchaser shall not take (or
cause or permit any of their respective Affiliates, including the Purchased
Subsidiaries, to take) any position inconsistent with the Final Allocation or
the LLC Allocations in any Tax Return or Tax Matter, except to the extent
required pursuant to a Determination.
(g) Promptly following the final determination of the LLC Allocations,
Purchaser and Seller shall jointly prepare, and Purchaser and Seller each shall
file (or cause to be filed), in each case in a manner consistent with the LLC
Allocations and applicable Tax Law, the Forms 8594 with respect to the purchase
and sale of the interests in the U.S. LLCs.
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3.4. PAYMENT OF INTER-COMPANY PAYABLES AND RECEIVABLES: Seller shall settle the
Inter-Company Payables and the Inter-Company Receivables before Closing in a
manner consistent with the Cash Extraction Plan as such Cash Extraction Plan may
be amended pursuant to Section 7.15.
(a) At Closing and for value, Purchaser (or any Affiliate designated by
Purchaser), as agent for the Purchased Subsidiaries, shall, pursuant to Section
3.2, pay to Seller (as agent for members of the Invensys Group to which the
Inter-Company Payables are owed) an amount equal to the sum of the Inter-Company
Payables, such amount being the repayment in full of the Inter-Company Payables.
(b) At Closing and for value, Seller (or any Affiliate designated by
Seller), as agent for the members of the Invensys Group from which the
Inter-Company Receivables are owed, shall, pursuant to Section 3.2, pay to
Purchaser (as agent for the relevant Purchased Subsidiaries to which the
Inter-Company Receivables are owed) an amount equal to the sum of the
Inter-Company Receivables, such amount being the repayment in full of the
Inter-Company Receivables.
(c) Seller shall deliver to Purchaser the Inter-Company Report at least two
Business Days before the Closing. During the 20 Business Day period following
Closing, Purchaser and its independent auditors shall be permitted to review the
working papers relating to the Inter-Company Report, and Seller shall cooperate
with Purchaser and its independent auditors to provide them with any other
information used in preparing the Inter-Company Report reasonably requested by
Purchaser and its independent auditors.
(d) The Inter-Company Report shall become final and binding upon the
parties on the 35th Business Day following Closing unless the Purchaser gives
written notice of its disagreement with the Inter-Company Report (an
"Inter-Company Notice of Disagreement") to Seller prior to such date. Any
Inter-Company Notice of Disagreement shall (i) specify in reasonable detail the
nature of any disagreement so asserted and (ii) only include disagreements based
on errors of fact or mathematical errors in the Inter-Company Report, or based
on the Net Inter-Company Payables Amount as shown in the Inter-Company Report
not being calculated in accordance with this Section 3.4.
(e) If an Inter-Company Notice of Disagreement is received by Seller in a
timely manner, then the Inter-Company Report (as revised in accordance with this
Section 3.4(e)) shall become final and binding upon Seller and Purchaser on the
earlier of (A) the date Seller and Purchaser resolve in writing any differences
they have with respect to the matters specified in the Inter-Company Notice of
Disagreement or (B) the date any disputed matters are finally resolved in
writing by the Independent Firm. The Inter-Company Report, as agreed by the
parties, or as determined by the Independent Firm, as the case may be, shall be
referred to as the "Final Inter-Company Report."
(f) During the 30-day period following the delivery of an Inter-Company
Notice of Disagreement, Seller and Purchaser shall seek in good faith to resolve
in writing any differences that they may have with respect to the matters
specified in the Inter-Company Notice of Disagreement. At the end of such 30-day
period, Seller and Purchaser shall submit in writing a
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description of any and all matters that remain in dispute and were included in
the Inter-Company Notice of Disagreement pursuant to Section 3.4(d), to an
Independent Firm for arbitration. The scope of the disputes to be resolved by
the Independent Firm shall be limited to disputes concerning whether there were
errors of fact or mathematical errors in the Inter-Company Report, and the
Independent Firm is not permitted to make any other determination.
(g) Seller and Purchaser agree to use reasonable efforts to cause the
Independent Firm to render a decision resolving any matters submitted to the
Independent Firm within 30 days following submission. Judgment may be entered
upon the determination of the Independent Firm in any court having jurisdiction
over the party against which such determination is to be enforced.
(h) The cost of any arbitration (including the fees and expenses of the
Independent Firm and reasonable attorney fees and expenses of the parties)
pursuant to this Section 3.4 shall be borne by Purchaser and Seller in inverse
proportion as they may prevail on matters resolved by the Independent Firm,
which proportionate allocations shall also be determined by the Independent Firm
at the time the determination of the Independent Firm is rendered on the merits
of the matters submitted.
(i) The fees and disbursements of Purchaser's independent auditors incurred
in connection with their report on the Inter-Company Report and review of any
Inter-Company Notice of Disagreement shall be borne by Purchaser, and the fees
and disbursements of Seller's independent auditors incurred in connection with
their review of the Inter-Company Report and any Inter-Company Notice of
Disagreement shall be borne by Seller.
(j) Until the full and complete resolution of any adjustment to the
Purchase Price contemplated by this Section 3.4, Purchaser shall provide to
Seller and any accountants, counsel or financial advisors retained by Seller in
connection with any adjustment to the Purchase Price contemplated by this
Section 3.4 reasonable access during normal business hours to all the
properties, books, contracts, personnel and records of the Business retained or
controlled by Purchaser relevant to the adjustment contemplated by this Section
3.4 and shall allow copies of the records to be made. Until the full and
complete resolution of any adjustment to the Purchase Price contemplated by this
Section 3.4, Seller shall provide to Purchaser and any accountants, counsel or
financial advisors retained by Purchaser in connection with any adjustment to
the Purchase Price contemplated by this Section 3.4 reasonable access during
normal business hours to all the properties, books, contracts, personnel and
records of the Business retained or controlled by Seller relevant to the
adjustment contemplated by this Section 3.4 and shall allow copies of the
records to be made.
(k) To the extent that the Final Inter-Company Report shall differ from the
Inter-Company Report, the payments made pursuant to Section 3.2 shall be deemed
to have been modified so as to be consistent with the final amounts of the
Inter-Company Payables and the Inter-Company Receivables set out in the Final
Inter-Company Report.
(l) Unless reflected in the Final Inter-Company Report, all Inter-Company
Payables and Inter-Company Receivables shall be deemed to be cancelled at the
Closing.
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(m) For purposes of this Agreement:
"Invensys Group" means Seller and each of its direct and indirect
subsidiaries, from time to time, other than the Purchased Subsidiaries.
"Inter-Company Payables" means, in relation to any Purchased Subsidiary,
the aggregate of all amounts owed by such Purchased Subsidiary as set out in the
Inter-Company Report for such Purchased Subsidiary, to any member of the
Invensys Group outstanding at the Closing. Inter-Company Payables shall not
include any amounts owed by any Purchased Subsidiary to any member of the
Invensys Group that are Inter-Company Trading Accounts.
"Inter-Company Receivables" means, in relation to any member of the
Invensys Group, the aggregate of all amounts owed by that member of the Invensys
Group as set out in the Inter-Company Report to any Purchased Subsidiary
outstanding at the Closing. Inter-Company Receivables shall not include any
amounts owed by any member of the Invensys Group to any Purchased Subsidiary
that are Inter-Company Trading Accounts.
"Inter-Company Report" means the report setting forth the Inter-Company
Payables (together with the payor and the payee of each Inter-Company Payable)
and Inter-Company Receivables (together with the payor and payee for each
Inter-Company Receivable) for each Purchased Subsidiary.
"Net Inter-Company Payables Amount" means the sum of the Inter-Company
Payables for each Purchased Subsidiary less the sum of the Inter-Company
Receivables for each Purchased Subsidiary.
3.5. WITHHOLDING RIGHTS: Purchaser and the Purchaser Designees shall be entitled
to deduct and withhold from the Purchase Price or any other payment owed at
Closing under to this Agreement such amounts that are required to be deducted
and withheld under the Code and accompanying U.S. Treasury Regulations and any
similar withholding requirements under state, local or non-U.S. Tax Law by
reason of the transactions consummated pursuant to this Agreement; provided,
however, that (i) Purchaser shall notify Seller, as soon as practicable and in
any event no later than twenty (20) Business Days before the Closing Date, of
any amounts that the Purchaser or Purchaser Designee intends to deduct and
withhold from the Purchase Price or any such other payment (other than any
deductions or withholdings that may be required pursuant to Section 1445 of the
Code or Section 116 of the Income Tax Act (Canada)), and (ii) Purchaser and the
Purchaser Designees shall not be entitled to deduct or withhold any amounts from
the Purchase Price or any other payment owed at Closing under to this Agreement
(x) pursuant to Section 1445 of the Code unless Seller has breached Section
7.8(a) or (y) in the case of the payment in consideration for Seller's entry
into the Non-Competition Agreement referred to in Section 3.1 unless Seller has
breached Section 7.8(b). Upon Seller's request, Purchaser shall, and shall cause
the Purchaser Designees to, cooperate with and assist Seller in taking any
measures that may be reasonably necessary and appropriate to mitigate, reduce or
eliminate any such deductions or withholdings or to obtain a Tax refund or
credit for Seller or any of its Affiliates of any amounts so withheld or
deducted. Purchaser and the Purchaser Designees shall pay over to the
appropriate taxing authorities any amounts so withheld on or prior to the due
date for such payments and shall provide to Seller a certified copy of an
official receipt of the tax
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authority evidencing such payment, and to the extent that amounts so withheld
are paid over to the appropriate taxing authority, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to Seller in
accordance with the terms of this Agreement.
ARTICLE IV.
Purchase Price Adjustments
4.1. YEAR END FINANCIAL STATEMENTS:
(a) Seller shall use reasonable best efforts to deliver to Purchaser by May
15, 2002 audited financial statements for the Business (the "Year End Financial
Statements") comprised of (i) a combined profit and loss account for the period
beginning April 1, 2001, and ending March 31, 2002 ("Year End Profit and Loss
Account"), (ii) a combined balance sheet as at March 31, 2002 ("Year End Balance
Sheet"), (iii) a combined statement of cash flows for the period beginning April
1, 2001, and ending at March 31, 2002 and (iv) footnotes with respect to each
thereof.
(b) The Year End Financial Statements shall:
(i) be prepared in accordance with U.K. GAAP applied on a basis
consistent with the basis on which U.K. GAAP was applied in connection with
the preparation of the Financial Statements for the nine months ended
December 31, 2001 (the "December Financial Statements");
(ii) be prepared on the basis of the applicable actual exchange rates
as of March 2002 in respect of the Year End Balance Sheet and the average
exchange rate from April 1, 2001 to March 31, 2002 in respect of the Year
End Profit and Loss Account, such applicable exchange rates to be as
published in the Financial Times; and
(iii) include a reconciliation to U.S. GAAP as to the items identified
therein.
(c) The Year End Financial Statements shall (i) include the consolidation,
statutory or other adjustments needed to present the Year End Financial
Statements in conformity with U.K. GAAP consistent with the December Financial
Statements, and (ii) be the basis from which the (A) Statement of EBITDA and (B)
the Net Book Value Statement shall be derived for the purposes of this Article
IV. Until the full and complete resolution of any adjustment to the Purchase
Price contemplated by this Article IV, Seller shall provide Purchaser and any
accountants, counsel or financial advisors retained by Purchaser in connection
with any adjustment to the Purchase Price contemplated by this Article IV
reasonable access during normal business hours to all the properties, books,
contracts, personnel and records of the Business retained or controlled by
Seller relevant to the Year End Financial Statements contemplated by this
Section 4.1 and shall allow copies of their records to be made. Until the full
and complete resolution of any adjustment to the Purchase Price contemplated by
this Article IV, Purchaser shall provide to Seller and any accountants, counsel
or financial advisors retained by Seller in connection with any adjustment to
the Purchase Price contemplated by this Article IV and in connection with the
preparation of the Year End Financial Statements reasonable access during normal
business hours to all the properties, books, contracts, personnel and records of
the Business retained or controlled by Purchaser relevant to the Year End
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Financial Statements contemplated by this Section 4.1 and shall allow copies of
their records to be made.
4.2. EBITDA PURCHASE PRICE ADJUSTMENT:
(a) As promptly as practicable, but not later than 20 Business Days after
the delivery of the Year End Financial Statements, Seller shall deliver to
Purchaser a statement of the earnings before restructuring costs and other
exceptional items, interest, taxes, depreciation and amortization (the "EBITDA")
of the Business (the "Statement of EBITDA"), for the financial year beginning on
April 1, 2001 and ended March 31, 2002, together with a statement by the
independent auditors of the Seller that the Statement of EBITDA has been
prepared in accordance with the requirements of this Section 4.2.
(b) The Statement of EBITDA shall be prepared in a format and manner
consistent with Schedule 4.2 that identifies the specific line items and
adjustments that will be included in EBITDA for the purposes of this Section
4.2, except that the amounts reflected in such Statement shall be as of the year
ended March 31, 2002, rather than as of the nine months ended December 31, 2001
and shall be derived from the Year End Financial Statements. Amounts set forth
in the Statement of EBITDA shall be stated in both U.K. Pounds Sterling and U.S.
Dollars.
(c) For the purposes of the EBITDA Purchase Price Adjustment (as defined
below), the EBITDA for the year ended March 31, 2002 as derived from the Year
End Financial Statements is to be adjusted, if necessary, such that the EBITDA
is calculated in accordance with U.K. GAAP applied the same way, using the same
accounting policies, practices, methodologies, judgments and income statement
classifications used in preparing the result for the nine months ended December
31, 2001 (the "Reference Income Statement"). Such adjustments shall be made, to
the extent required, to achieve consistency of measurement contemplated above,
including to reflect:
(i) that the Business was trading under Seller's continuing ownership
up to the March 31, 2002;
(ii) so as to exclude any charge, accrual, provision, reserve or write
off in respect of any costs, liabilities or charges to be incurred after
the Closing, or in respect of any asset included in the financial
statements at or before March 31, 2002, in any such case, (A) as a
consequence of such change of ownership of the Business or any change in
management strategy, direction or priority that results from such change in
ownership, including, but not limited to, any disposal, closure,
reorganization or restructuring of any operations of the Business, or (B)
relating to the recording of the acquisition of the Business by Purchaser.
(d) The foregoing principles are referred to in this Agreement as the
"Reference Income Statement Principles." The adjustment contemplated by this
Section 4.2 is intended to show the difference, if any, between the projected
EBITDA of $87 million (calculated on the basis of the December Financial
Statements) and the actual EBITDA for the year ended March 31, 2002, and such
difference can only be measured if the calculation is done in the same way,
using the same accounting methods, for both amounts.
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(e) In the event that the amount of EBITDA set forth on the Statement of
EBITDA is less than $81 million (and the Closing has occurred), then Seller
shall pay to Purchaser the amount, and, if the Closing has not yet occurred, the
Purchase Price shall be reduced by the amount, equal to 6 times the difference
between the amount of EBITDA set forth on the Statement of EBITDA and $81
million, in immediately available funds (the "EBITDA Purchase Price
Adjustment").
(f) Purchaser's accountants will be kept informed during the preparation of
the Statement of EBITDA and may review working papers of the Seller and the
Seller's independent auditors, provided, however, that Purchaser acknowledges
that Seller shall have the primary responsibility and authority for preparing
the Year End Financial Statements and the Statement of EBITDA, and Seller's
independent auditors shall have the primary responsibility and authority for
preparing the Statement of EBITDA.
(g) During the 30-day period following Purchaser's receipt of the Statement
of EBITDA, Purchaser and its independent auditors shall be permitted to review
the working papers relating to the Statement of EBITDA and Seller shall
cooperate with Purchaser and its independent auditors to provide them with any
other information used in preparing the Statement of EBITDA reasonably requested
by Purchaser and its independent auditors.
(h) The Statement of EBITDA shall become final and binding upon the parties
on the 30th day following delivery unless the Purchaser gives written notice of
its disagreement with the Statement of EBITDA (an "EBITDA Notice of
Disagreement") to Seller prior to such date. Any EBITDA Notice of Disagreement
shall (i) specify in reasonable detail the nature of any disagreement so
asserted and (ii) only include disagreements based on errors of fact or
mathematical errors in the Year End Financial Statements and/or the Statement of
EBITDA, or based on the EBITDA as shown in the Statement of EBITDA not being
calculated in accordance with this Section 4.2.
(i) If an EBITDA Notice of Disagreement is received by Seller in a timely
manner, pursuant to Section 4.2(h), then the Statement of EBITDA (as revised in
accordance with this Section 4.2(i)) shall become final and binding upon Seller
and Purchaser on the earlier of (A) the date Seller and Purchaser resolve in
writing any differences they have with respect to the matters specified in the
EBITDA Notice of Disagreement or (B) the date any disputed matters are finally
resolved in writing by the Independent Firm.
(j) During the 30-day period following the delivery of an EBITDA Notice of
Disagreement, Seller and Purchaser shall seek in good faith to resolve in
writing any differences that they may have with respect to the matters specified
in the EBITDA Notice of Disagreement. At the end of such 30-day period, Seller
and Purchaser shall submit in writing a description of any and all matters that
remain in dispute and were included in the EBITDA Notice of Disagreement
pursuant to Section 4.2(h), to an Independent Firm for arbitration. The scope of
the disputes to be resolved by the Independent Firm shall be limited to disputes
concerning whether such calculation was done in accordance with the Reference
Income Statement Principles, and whether there were errors of fact or
mathematical errors in the Statement of EBITDA. The Independent Firm is not
permitted to make any other determination.
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(k) Seller and Purchaser agree to use reasonable efforts to cause the
Independent Firm to render a decision resolving any matters submitted to the
Independent Firm within 30 days following submission. Judgment may be entered
upon the determination of the Independent Firm in any court having jurisdiction
over the party against which such determination is to be enforced.
(l) The cost of any arbitration (including the fees and expenses of the
Independent Firm and reasonable attorney fees and expenses of the parties)
pursuant to this Section 4.2 shall be borne by Purchaser and Seller in inverse
proportion as they may prevail on matters resolved by the Independent Firm,
which proportionate allocations shall also be determined by the Independent Firm
at the time the determination of the Independent Firm is rendered on the merits
of the matters submitted.
(m) The fees and disbursements of Seller's independent auditors incurred in
connection with their report on the Statement of EBITDA and review of any EBITDA
Notice of Disagreement shall be borne by Seller, and the fees and disbursements
of Purchaser's independent auditors incurred in connection with their review of
the Statement of EBITDA and any EBITDA Notice of Disagreement shall be borne by
Purchaser.
(n) Until the full and complete resolution of any adjustment to the
Purchase Price contemplated by this Section 4.2, Seller shall provide to
Purchaser and any accountants, counsel or financial advisors retained by
Purchaser in connection with any adjustment to the Purchase Price contemplated
by this Section 4.2 reasonable access during normal business hours to all the
properties, books, contracts, personnel and records of the Business retained or
controlled by Seller relevant to the adjustment contemplated by this Section 4.2
and shall allow copies of their records to be made. Until the full and complete
resolution of any adjustment to the Purchase Price contemplated by this Section
4.2, Purchaser shall provide to Seller and any accountants, counsel or financial
advisors retained by Seller in connection with any adjustment to the Purchase
Price contemplated by this Section 4.2 reasonable access during normal business
hours to all the properties, books, contracts, personnel and records of the
Business retained or controlled by Purchaser relevant to the adjustment
contemplated by this Section 4.2 and shall allow copies of their records to be
made.
(o) Nothing in this Section 4.2 shall be construed to limit the condition
to Purchaser's obligation contained in Section 10.10.
4.3. NET BOOK VALUE PURCHASE PRICE ADJUSTMENT:
(a) Within 20 Business days after the delivery of the Year End Financial
Statements, Seller shall prepare and deliver to Purchaser a statement (the "Net
Book Value Statement"), setting forth the Net Book Value of the Business as of
March 31, 2002 (the "Stated Net Book Value") together with a statement by the
independent auditors of the Seller that the Net Book Value Statement has been
prepared in compliance with the requirements of this Section 4.3.
(b) The Net Book Value Statement shall be prepared in a format and manner
consistent with Schedule 4.3 that identifies the specific line items and
adjustments that will be included for the purposes of this Section 4.3, except
that the amounts reflected in such
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Statement shall be as of the year ended March 31, 2002 rather than as of
December 31, 2001 and shall be derived from the Year End Financial Statements.
Amounts set forth in the Net Book Value Statement shall be stated in both U.K.
Pounds Sterling and U.S. Dollars.
(c) The term "Net Book Value" means the aggregate of the amounts extracted
from the Year End Financial Statements with respect to the following line items
(A) Tangible Fixed Assets; (B) Investments in Associated Undertakings; (C) Other
Fixed Asset Investments; (D) Stocks; (E) Gross Trade Debtors, (F) Amounts
recoverable on long-term contracts; (G) Other debtors; (H) Prepayments and
accrued income; (I) Invensys Group balances receivable and falling due within
one year; (J) Debtors: amounts falling due after more than one year: Other
debtors (K) Payments received on account; (L) Trade creditors; (M) Other
creditors; (N) Accruals and deferred income; (O) Invensys Group balances payable
and falling due within one year; (P) Provisions for Liabilities and Charges -
Pensions; (Q) Provisions for Liabilities and Charges - Post Retirement Benefits;
(R) Provisions for Liabilities and Charges - Warranties; and (S) Minority
Interests - Equity, together with such adjustments required to comply with
Section 4.3(d).
(d) The line items that comprise Net Book Value shall be calculated in
accordance with U.K. GAAP applied in the same way, using the same accounting
policies, practices, methodologies, judgments and balance sheet classifications
used in preparing the balance sheet as at December 31, 2001 (the "Reference
Balance Sheet"). The foregoing principles are referred to in this Agreement as
the "Balance Sheet Principles." Adjustments shall be made to the extent required
to ensure consistency with the basis on which the Adjusted Net Book Value amount
of $281.4 million set out in Section 4.3(e) was calculated as illustrated on
Schedule 4.3, including to:
(i) reflect the arrangements relating to the lease with respect to the
property at Walsroder Str. 9, 11, 13 and 15, Munchner Str. 67, 77 and 79
and Hemmstr 130 in Bremen, Germany (the "Gestra Lease") as a finance lease;
(ii) reflect only trade debtors and related bad debt, credit note and
other provisions and to exclude the impact of factoring or discounting of
trade debtors;
(iii) that the Business was trading under Seller's continuing
ownership up to the March 31, 2002;
(iv) so as to exclude any charge, accrual, provision, reserve or write
off in respect of any costs, liabilities or charges to be incurred after
the Closing, or in respect of any asset included in the financial
statements at or before March 31, 2002, in any such case, (A) as a
consequence of such change of ownership of the Business or any change in
management strategy, direction or priority that results from such change in
ownership, including, but not limited to, any disposal, closure,
reorganization or restructuring of any operations of the Business, or (B)
relating to the recording of the acquisition of the Business by Purchaser;
(v) exclude assets and liabilities in respect of Taxes; and
(vi) exclude Excluded Assets and Retained Liabilities.
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(e) The Purchase Price shall be decreased by the amount by which the actual
Net Book Value at Closing is less than $262.5 million (the Purchase Price as so
adjusted shall hereinafter be referred to as the "Net Book Value Adjusted
Purchase Price").
(f) If the Purchase Price (disregarding for this purpose any other
adjustments to the Purchase Price provided for in this Agreement) is more than
the Net Book Value Adjusted Purchase Price, Seller shall, within the later of
five Business Days after the Net Book Value Statement becomes final and binding
on the parties and five Business Days after the Closing, make payment to
Purchaser by wire transfer in immediately available funds of the amount of such
difference.
(g) Purchaser's accountants will be kept informed during the preparation of
the Net Book Value Statement and may review working papers of the Seller and the
Seller's independent auditors, provided, however, that Purchaser acknowledges
that Seller shall have the primary responsibility and authority for preparing
the Year End Financial Statements and the Net Book Value Statement and Seller's
independent auditors shall have the primary responsibility and authority for
reporting on the Net Book Value Statement.
(h) During the 30-day period following Purchaser's receipt of the Net Book
Value Statement, Purchaser and its independent auditors shall be permitted to
review the working papers relating to the Net Book Value Statement and Seller
shall cooperate with Purchaser and its independent auditors to provide them with
any other information used in preparing the Net Book Value Statement reasonably
requested by Purchaser and its independent auditors.
(i) The Net Book Value Statement shall become final and binding upon the
parties on the 30th day following delivery unless the Purchaser gives written
notice of its disagreement with the Net Book Value Statement (a "Net Book Value
Notice of Disagreement") to Seller prior to such date. Any Net Book Value Notice
of Disagreement shall (i) specify in reasonable detail the nature of any
disagreement so asserted and (ii) only include disagreements based on errors of
fact or mathematical errors in the Year End Financial Statements and/or the Net
Book Value Statement, or based on the Net Book Value as shown in the Net Book
Value Statement not being calculated in accordance with this Section 4.3.
(j) If a Net Book Value Notice of Disagreement is received by Seller in a
timely manner, then the Net Book Value Statement (as revised in accordance with
this Section 4.3(j)) shall become final and binding upon Seller and Purchaser on
the earlier of (A) the date Seller and Purchaser resolve in writing any
differences they have with respect to the matters specified in the Net Book
Value Notice of Disagreement or (B) the date any disputed matters are finally
resolved in writing by the Independent Firm.
(k) During the 30-day period following the delivery of an Net Book Value
Notice of Disagreement, Seller and Purchaser shall seek in good faith to resolve
in writing any differences that they may have with respect to the matters
specified in the Net Book Value Notice of Disagreement. At the end of such
30-day period, Seller and Purchaser shall submit in writing a description of any
and all matters that remain in dispute and were included in the Net Book Value
Notice of Disagreement pursuant to Section 4.3(i) to an Independent Firm for
arbitration. The scope of the disputes to be resolved by the Independent Firm
shall be limited to disputes
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concerning whether such calculation was done in accordance with the Reference
Balance Sheet Principles, and whether there were errors of fact or mathematical
errors in the Net Book Value Statement, and the Independent Firm is not to make
any other determination.
(l) Seller and Purchaser agree to use reasonable efforts to cause the
Independent Firm to render a decision resolving any matters submitted to the
Independent Firm within 30 days following submission. Judgment may be entered
upon the determination of the Independent Firm in any court having jurisdiction
over the party against which such determination is to be enforced.
(m) The cost of any arbitration (including the fees and expenses of the
Independent Firm and reasonable attorney fees and expenses of the parties)
pursuant to this Section 4.3 shall be borne by Purchaser and Seller in inverse
proportion as they may prevail on matters resolved by the Independent Firm,
which proportionate allocations shall also be determined by the Independent Firm
at the time the determination of the Independent Firm is rendered on the merits
of the matters submitted.
(n) The fees and disbursements of Seller's independent auditors incurred in
connection with their report on the Net Book Value Statement and review of any
Net Book Value Notice of Disagreement shall be borne by Seller, and the fees and
disbursements of Purchaser's independent auditors incurred in connection with
their review of the Net Book Value Statement and any Net Book Value Notice of
Disagreement shall be borne by Purchaser.
(o) Until the full and complete resolution of any adjustment to the
Purchase Price contemplated by this Section 4.3, Seller shall provide to
Purchaser and any accountants, counsel or financial advisors retained by
Purchaser in connection with any adjustment to the Purchase Price contemplated
by this Section 4.3 reasonable access during normal business hours to all the
properties, books, contracts, personnel and records of the Business retained or
controlled by Seller relevant to the adjustment contemplated by this Section 4.3
and shall allow copies of the records to be made. Until the full and complete
resolution of any adjustment to the Purchase Price contemplated by this Section
4.3, Purchaser shall provide to Seller and any accountants, counsel or financial
advisors retained by Seller in connection with any adjustment to the Purchase
Price contemplated by this Section 4.3 reasonable access during normal business
hours to all the properties, books, contracts, personnel and records of the
Business retained or controlled by Purchaser relevant to the adjustment
contemplated by this Section 4.3 and shall allow copies of the records to be
made.
4.4. FINAL CASH/OVERDRAFT DEBT ADJUSTMENT:
(a) As promptly as practicable after the Closing, but not later than 30
Business Days after Closing, Purchaser shall deliver to Seller a statement of
the Final Cash/Overdraft Debt Balance (as defined below) of the Business (the
"Statement of Final Cash/Overdraft Debt Balance"), as of the Closing.
(b) For purposes of this Article IV:
(i) "Cash" means the aggregate amount of cash as shown on the books
and records of the Purchased Subsidiaries (rather than as shown on the bank
statements of the
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Purchased Subsidiaries) and therefore shall be reduced by any checks, wire
transfers, giros, or any other debits written or otherwise executed on or
prior to the Closing Date that have not yet cleared the bank accounts; and
shall be increased by any deposits or cash in transit (including from other
Invensys Group companies or Purchased Subsidiaries) that have not yet been
credited to the bank accounts, less (A) $3.25 million and (B) $1.575
million (it being understood that the resulting number may be a negative
number).
(ii) "Overdraft Debt" means the aggregate amount of indebtedness as
shown on the books and records of the Purchased Subsidiaries (rather than
as shown on the bank statements of the Purchased Subsidiaries) and
therefore shall be increased by any checks, wire transfers, giros, or any
other debits written or otherwise executed on or prior to the Closing Date
that have not yet cleared the bank accounts; and shall be reduced by any
deposits or cash in transit (including from other Invensys Group companies
or Purchased Subsidiaries) that has not yet been credited to the bank
accounts together with the amount of the Restructuring Provision (as
defined below) as of the Closing (it being understood that the resulting
number may be a positive number). Overdraft Debt will not include
liabilities for guarantees of indebtedness of the Purchased Assets,
Inter-Company payables, finance leases, operating leases or liabilities for
non-recourse factoring.
(iii) "Final Cash/Overdraft Debt Balance" means the amount of Cash
reduced by the amount of Overdraft Debt.
(iv) "Restructuring Provision" means the aggregate amount of the
liabilities at Closing in respect restructuring projects at Gestra GmbH,
IFC Germany GmbH and NAF AB (including but not limited to liabilities for
obligations under old-age-part-time severance arrangements in Germany) and
any other similar liabilities that would be classified within the line item
`Provisions for liabilities and charges - Restructuring' in a set of
financial statements prepared consistently with the Year End Financial
Statements which, for purposes of reference, was (pound)3.8 million as of
December 31, 2001.
(c) The Final Cash/Overdraft Debt Balance as finally agreed will be
paid as follows:
(i) if the Final Cash/Overdraft Debt Balance is a positive amount,
then Purchaser will pay Seller the amount of the Final Cash/Overdraft Debt
Balance together with interest at LIBOR from the Closing Date, within five
Business Days after the Final Cash/Overdraft Debt Balance is determined;
(ii) if the Final Cash/Overdraft Debt Balance is a negative amount
then Seller will pay Purchaser the amount of Final Cash/Overdraft Debt
Balance, together with interest at LIBOR from the Closing Date, within five
Business Days after the Final Cash/Overdraft Debt Balance is determined;
(d) The Final Cash/Overdraft Debt Balance will constitute an upward or
downward, as the case may be, adjustment of the Closing Payment paid by
Purchaser for the Purchased Assets.
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(e) During the 20-day period following Seller's receipt of the Statement of
Final Cash/Overdraft Debt Balance, Seller and its independent auditors shall be
permitted to review the working papers relating to the Statement of Final
Cash/Overdraft Debt Balance, and Purchaser shall cooperate with Seller and its
independent auditors to provide them with any other information used in
preparing the Statement of Final Cash/Overdraft Debt Balance reasonably
requested by Seller and its independent auditors.
(f) The Statement of Final Cash/Overdraft Debt Balance shall become final
and binding upon the parties on the 20th day following delivery unless the
Seller gives written notice of its disagreement with the Statement of Final
Cash/Overdraft Debt Balance (a "Cash/Debt Notice of Disagreement") to Purchaser
prior to such date. Any Cash/Debt Notice of Disagreement shall (i) specify in
reasonable detail the nature of any disagreement so asserted and (ii) only
include disagreements based on errors of fact or mathematical errors in the
Statement of Final Cash/Overdraft Debt Balance, or based on the Final
Cash/Overdraft Debt Balance as shown in the Statement of Final Cash/Overdraft
Debt Balance not being calculated in accordance with this Section 4.4.
(g) If a Cash/Debt Notice of Disagreement is received by Purchaser in a
timely manner, then the Statement of Final Cash/Overdraft Debt Balance (as
revised in accordance with this Section 4.4(g) shall become final and binding
upon Seller and Purchaser on the earlier of (A) the date Seller and Purchaser
resolve in writing any differences they have with respect to the matters
specified in the Cash/Debt Notice of Disagreement or (B) the date any disputed
matters are finally resolved in writing by the Independent Firm.
(h) During the 30-day period following the delivery of an Cash/Debt Notice
of Disagreement, Seller and Purchaser shall seek in good faith to resolve in
writing any differences that they may have with respect to the matters specified
in the Cash/Debt Notice of Disagreement. At the end of such 30-day period,
Seller and Purchaser shall submit in writing a description of any and all
matters that remain in dispute and were included in the Cash/Debt Notice of
Disagreement pursuant to Section 4.4(f), to an Independent Firm for arbitration.
The scope of the disputes to be resolved by the Independent Firm shall be
limited to disputes concerning whether there were errors of fact or mathematical
errors in the Statement of Final Cash/Overdraft Debt Balance, and the
Independent Firm is not permitted to make any other determination.
(i) Seller and Purchaser agree to use reasonable efforts to cause the
Independent Firm to render a decision resolving any matters submitted to the
Independent Firm within 30 days following submission. Judgment may be entered
upon the determination of the Independent Firm in any court having jurisdiction
over the party against which such determination is to be enforced.
(j) The cost of any arbitration (including the fees and expenses of the
Independent Firm and reasonable attorney fees and expenses of the parties)
pursuant to this Section 4.4 shall be borne by Purchaser and Seller in inverse
proportion as they may prevail on matters resolved by the Independent Firm,
which proportionate allocations shall also be determined by the Independent Firm
at the time the determination of the Independent Firm is rendered on the merits
of the matters submitted.
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(k) The fees and disbursements of Purchaser's independent auditors incurred
in connection with their report on the Statement of Final Cash/Overdraft Debt
Balance and review of any Cash/Debt Notice of Disagreement shall be borne by
Purchaser, and the fees and disbursements of Seller's independent auditors
incurred in connection with their review of the Statement of Final
Cash/Overdraft Debt Balance and any Cash/Debt Notice of Disagreement shall be
borne by Seller.
(l) Until the full and complete resolution of any adjustment to the
Purchase Price contemplated by this Section 4.4, Purchaser shall provide to
Seller and any accountants, counsel or financial advisors retained by Seller in
connection with any adjustment to the Purchase Price contemplated by this
Section 4.4 reasonable access during normal business hours to all the
properties, books, contracts, personnel and records of the Business retained or
controlled by Purchaser relevant to the adjustment contemplated by this Section
4.4 and shall allow copies of the records to be made. Until the full and
complete resolution of any adjustment to the Purchase Price contemplated by this
Section 4.4, Seller shall provide to Purchaser and any accountants, counsel or
financial advisors retained by Purchaser in connection with any adjustment to
the Purchase Price contemplated by this Section 4.4 reasonable access during
normal business hours to all the properties, books, contracts, personnel and
records of the Business retained or controlled by Seller relevant to the
adjustment contemplated by this Section 4.4 and shall allow copies of the
records to be made.
ARTICLE V.
Closing Matters
5.1. THE CLOSING:
(a) On the terms and subject to the conditions of this Agreement, the
purchase and sale (the "Closing") contemplated under this Agreement shall take
place at the offices of Fried, Frank, Harris, Shriver & Jacobson, One New York
Plaza, New York, New York or at such other place as the parties shall mutually
agree upon, at 10:00 A.M. local time on the later of: (i) five (5) Business Days
after the satisfaction or waiver of the conditions set forth in Article X and XI
(other than those conditions that by their nature are to be satisfied at
Closing, but subject to the satisfaction or waiver of such conditions),
provided, however, that if prior to June 15, 2002, all conditions to Closing set
forth in Article X and Article XI have been satisfied or waived (other than
those conditions that by their nature are to be satisfied at Closing) but
Purchaser does not have sufficient funds (other than the proceeds of the Bridge
Notes (as defined in the Commitment Letters)) available to enable Purchaser to
complete the transactions contemplated by this Agreement, Purchaser may, upon
written notice thereof to Seller, defer the Closing Date until any date that is
not later than June 15, 2002 (it being agreed that this date shall be extended
by one day for each day later than May 15, 2002 that Seller provides Purchaser
with the Year End Financial Statements and/or the Guarantor/Non-Guarantor
Information required to be delivered pursuant to pursuant to Section 7.14) and
provided further that if all conditions to Purchaser's obligations to close
contained in Article X are satisfied other than the condition contained in
Section 10.9 hereof, Purchaser may defer the Closing until any date not later
than July 31, 2002, or (ii) such other time or date as the parties shall
mutually agree upon in writing. All actions scheduled in this Agreement for the
Closing Date shall be deemed to occur simultaneously. The date the Closing takes
place is herein referred to as the "Closing Date."
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Except as provided in Article XVII, the Closing shall be deemed to be effective
as of 12:01 A.M. on the Closing Date.
(b) At the Closing, Purchaser shall transfer the Closing Payment to a bank
account designated by Seller in accordance with Section 3.2.
(c) At the Closing and effective on the Closing Date, Seller shall execute
and deliver (or cause to be executed and delivered by the appropriate member of
the Seller Group) the following documents to Purchaser (collectively, the
"Conveyance Instruments"):
(i) share certificates, share transfer forms, or such other documents
(including, if necessary for local registration purposes, appropriate
contracts of sale) representing or signifying and confirming transfer of
all of the Seller Group's ownership of the Target Subsidiaries free and
clear of all Encumbrances (other than Permitted Liens), properly endorsed
for transfer (if appropriate) of the Seller Group's record and beneficial
ownership in and to the Target Subsidiaries;
(ii) such deed or deeds as shall be effective to vest in Purchaser or
the appropriate Purchaser Designee good and marketable fee simple title to
all of the Owned Real Property (as defined in Section 8.5(a)) constituting
Target Assets, free and clear of all Encumbrances, except for Permitted
Liens. For purposes of this Agreement, "Permitted Liens" shall mean
mechanics', carriers', workmen's, repairmen's or other like liens arising
or incurred in the ordinary course of business regarding Claims that are
not yet due and payable, liens for Taxes and other governmental charges
which are not yet due and payable or which may thereafter be paid without
penalty, Encumbrances which do not materially interfere with the present
use or economic value of the Purchased Assets and any other exceptions
which may be listed on Schedule 5.1(c)(ii) or 8.5(a);
(iii) bills of sale, endorsements, assignments and other good and
sufficient instruments of sale, transfer, conveyance and assignment, in
forms reasonably satisfactory to Purchaser, as shall be effective to vest
in Purchaser or the appropriate Purchaser Designee title, free and clear of
all Encumbrances (other than Permitted Liens), to the Purchased Assets
other than the Owned Real Property;
(iv) a duly executed receipt indicating receipt of the Closing
Payment;
(v) any such other certifications or documents as may be required to
be delivered at the Closing under the terms of this Agreement;
(vi) copies of all directors', shareholders' or other resolutions
required under local law to approve or effectuate the transfer to Purchaser
of the Target Assets and the Purchased Subsidiaries; and
(vii) copies of all minutes of meetings of works councils or other
employee representative bodies, if any, required under European Union or
European Union Member State law to demonstrate compliance with Sections
8.28 and 10.12.
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(d) At the Closing, Purchaser shall execute and deliver to Seller such
documents as may be reasonably requested by Seller to effect the assumption by
Purchaser of the Assumed Liabilities.
(e) At the Closing, Seller shall cause any directors or officers of the
Purchased Subsidiaries who are officers or employees of Seller or any of its
Affiliates (other than Transferred Employees) to resign or to be removed as
directors and officers thereof.
(f) At the Closing, each of Seller and Purchaser shall enter into a
non-competition agreement in the form attached hereto as Exhibit A (the
"Non-Competition Agreement").
(g) At the Closing, Seller shall deliver or cause to be delivered by the
appropriate member of the Seller Group to the Purchaser or the relevant
Purchaser Designee all Target Assets which are capable of transfer by delivery
with the intent that legal and beneficial title to such Target Assets shall pass
by and upon such delivery.
(h) Notwithstanding the foregoing, at the election of Purchaser and with
the prior written consent of Seller (which consent shall not be unreasonably
withheld, delayed or conditioned), the Closing may be held in multiple stages on
the same day as the Closing to facilitate the Tax planning objectives of
Purchaser (the "Multi-Stage Closing"). Any additional costs reasonably and
properly incurred by Seller, any Affiliate of Seller or any Purchased Subsidiary
and any additional Taxes payable by Seller, any Affiliate of Seller or any
Purchased Subsidiary (including, without limitation, any such Taxes arising out
of or resulting from any reduction to Seller's Attributes, Seller's Refunds or
any losses, credits, Reliefs, allowances or other similar Tax attributes of
Seller or any Affiliate of Seller) as a result of the Multi-Stage Closing shall
be for the account of Purchaser.
(i) Provided that no later than seven Business Days prior to the Closing
Date Purchaser shall have provided to Seller for its review and approval (which
approval shall not be unreasonably withheld, delayed or conditioned) any
applicable Tax Returns and other documentation with respect to the Transfer
Taxes owed on stampable documents conveying the Purchased Assets (which
applicable Tax Returns and other documentation shall be prepared in a manner
consistent with the Stamp Duty Allocation), at the Closing, Seller shall pay to
Purchaser 50% of the Transfer Taxes shown as due on such Tax Returns and other
documentation or otherwise payable with respect to such stampable documents,
such Transfer Taxes to be computed in each case based on the Stamp Duty
Allocation.
ARTICLE VI.
Transfer After the Closing
6.1. FURTHER INSTRUMENTS AND ACTIONS: From time to time after the Closing Date,
upon request of Purchaser, Seller and each member of Seller Group, without
further consideration, shall cooperate with Purchaser and shall duly execute,
acknowledge and deliver all such further deeds, assignments, transfers,
conveyances and powers of attorney and take such other actions and give such
assurances as may be reasonably required to convey to and vest in Purchaser all
right, title and interest in the Purchased Assets. Seller shall promptly pay or
deliver to Purchaser any amounts or items which may be received by Seller or any
member of Seller
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Group on or after the Closing Date which constitute Purchased Assets and
Purchaser shall promptly pay or deliver to Seller any amounts or items which may
be received by Purchaser on or after Closing Date which constitute Excluded
Assets. Purchaser shall be solely responsible for all costs relating to the
preparation and the filing, or other recordation, of all instruments of transfer
or assignment reasonably necessary to vest in Purchaser title to the Seller
Intellectual Property (as defined in Section 8.11(c)) whether such documents are
executed by Seller at the Closing under Section 5.1(c)(iii) or after the Closing
Date.
6.2. PURCHASED ASSETS REQUIRING CONSENTS: In the event any consent or waiver of
a third party which is legally required in order for Seller to effect the sale,
assignment or transfer to Purchaser or any Purchaser Designee of any Target
Asset (including any consents referred to in Section 10.3 with respect to which
Purchaser has waived the closing condition) has not been obtained by the Closing
Date then such Target Asset shall not be deemed to be sold, transferred,
conveyed or assigned to Purchaser at the Closing. If a Target Asset is not so
sold, transferred, conveyed or assigned, or if any consent or waiver of a third
party which is legally required to enable the Purchased Subsidiaries to continue
to use after the Closing Date any assets used in, held for use or pertaining to
the Business (such assets the "Purchased Subsidiary Assets"), has not been
obtained by the Closing Date, the following shall apply:
(a) Seller shall, and shall cause the relevant member of the Seller Group
to, use all reasonable commercial efforts to cooperate with Purchaser or the
relevant Purchaser Designee in entering into a reasonable arrangement designed
to provide Purchaser or the relevant Purchaser Designee with the benefit of
Seller's rights (or the rights of the relevant Seller Group member) under or
pursuant to or in respect of such Target Asset, or to enable the continued use
by the Purchased Subsidiaries of the Purchased Subsidiary Assets (provided that
Seller shall not be required to make any additional payments or incur any
additional liabilities to enter into such arrangement);
(b) Seller shall, and shall cause the relevant member of the Seller Group
to, use its reasonable commercial efforts to cooperate with Purchaser or the
relevant Purchaser Designee in obtaining any such required consent or waiver as
soon as practicable following the Closing Date (provided that Seller should not
be required to make any payments to the third party whose consent is being
sought); and
(c) immediately upon obtaining all legally required consents or waivers for
such Target Asset, such Target Asset shall be deemed to be sold, transferred,
conveyed or assigned to Purchaser or the relevant Purchaser Designee as of the
receipt of such consents or waivers and Seller or the appropriate member of
Seller Group shall execute, without further consideration from Purchaser or the
relevant Purchaser Designee, any documents reasonably requested by Purchaser or
the relevant Purchaser Designee to confirm that such Target Asset, as
applicable, has been sold, transferred, conveyed or assigned to Purchaser or the
relevant Purchaser Designee.
(d) immediately upon obtaining all legally required consents or waivers for
such Purchased Subsidiary Asset, the Seller or the appropriate member of the
Seller Group shall, without further consideration from Purchaser or the relevant
Purchased Subsidiary, execute any
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documents reasonably requested by the Purchaser or the relevant Purchased
Subsidiary to confirm the right to the continued use of such Purchased
Subsidiary Asset.
6.3. CERTAIN PREEMPTIVE RIGHTS: Notwithstanding anything to the contrary
contained in this Agreement (including the Schedules hereto), this Agreement
shall not constitute an agreement by Seller to sell, assign or transfer or an
offer to sell, assign or transfer any of the interests listed on Schedule 6.3
hereto (the "Joint Venture Interests") in the joint ventures listed on Schedule
6.3 hereto (the "Business Joint Ventures"), each of which may be subject to a
right of first offer in favor of a third party. The parties acknowledge and
agree that Seller may not be able to transfer the Joint Venture Interests or
some portion thereof to Purchaser at the Closing because of existing contractual
or other obligations of Seller or its Affiliates (or the applicable provisions
of the joint venture agreement, limited liability company agreement or other
constitutive document of a Business Joint Venture). Notwithstanding anything to
the contrary contained in Article III hereof, if Seller is unable to transfer
the Joint Venture Interests relating to any Business Joint Venture at the
Closing, Purchaser shall be entitled to reduce the Purchase Price by an amount
equal to the value of such Joint Venture Interests as mutually agreed by the
parties acting reasonably (which values shall not exceed the fair market values
of such Joint Venture Interests) prior to the offering of such Joint Venture
Interests to the applicable third parties.
ARTICLE VII.
Actions Prior to Closing
7.1. ACCESS: Prior to the Closing Date, Seller shall, and shall cause its
subsidiaries, officers, employees, counsel, financial advisors and other
representatives to, afford to Purchaser and its representatives reasonable
access, during normal business hours and in a manner that is not unreasonably
disruptive to the operations of the Business or the business of Seller and its
subsidiaries, to the properties, books, contracts, commitments, personnel and
records of (i) the Purchased Subsidiaries and (ii) of members of the Seller
Group and holders of Target Assets primarily relating to the Business during
such period, Seller shall, and shall cause its subsidiaries, officers, employees
and representatives to, furnish as promptly as practicable to Purchaser all
information concerning the properties, financial condition, operations and
personnel of the Purchaser Subsidiaries and the Business as Purchaser may from
time to time reasonably request. In no event shall Purchaser be permitted to
conduct, prior to the Closing Date, Phase II environmental assessments or any
other sampling or testing of soil and/or ground or surface waters at, on or
under the Real Property (as defined in Section 8.5(b)). Purchaser will hold, and
will cause its directors, officers, employees, accountants, counsel, financial
advisors and other representatives and Affiliates, successors and assigns to
hold, any nonpublic information in confidence to the extent required by, and in
accordance with, the provisions of the confidentiality agreement, previously
entered into, between or on behalf of Purchaser and Seller, the terms of which
are hereby incorporated herein by reference (the "Confidentiality Agreement").
7.2. OBTAINING OF APPROVALS AND CONSENTS:
(a) No later than five Business Days after the date hereof, each party
shall make all filings under the HSR Act (as defined in Section 10.3) required
in connection with
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the consummation of the transactions contemplated by this Agreement. As soon as
reasonably practicable after the date hereof, each party shall use its
reasonable best efforts to (x) make all other necessary filings with all
governmental bodies or other regulatory authorities to obtain licenses, permits,
approvals, or authorizations and (y) obtain all consents of third parties in
each case required for the sale, assignment or transfer to Purchaser of any of
the Target Assets or Purchased Subsidiaries or the consummation of any of the
transactions contemplated by this Agreement.
(b) Each party shall bear its own cost of complying with or obtaining the
consent to or approval of the transactions contemplated hereby of any
governmental or third party, including, without limitation, any such approval or
consent required by any safety, health, environmental or other applicable law or
regulation. Each party hereto shall provide to the other party such information
as the other party may reasonably request in order to enable it to prepare such
filings. Each party hereto shall also use its reasonable best efforts to
expedite any governmental or other third party review and to obtain all such
necessary consents, approvals, licenses and permits as promptly as practicable.
(c) Purchaser and Seller agree to have Purchaser Designees and members of
the Seller Group enter into individual transfer agreements no later than the
Closing Date, covering portions of the overall sale and transfer of the Target
Assets and the Target Subsidiaries to the extent necessary under applicable law
to convey such assets and entities (the "Transfer Agreements"); provided that
the terms and conditions of the Transfer Agreements are consistent with the
terms and conditions set forth in this Agreement except where otherwise required
under applicable law.
7.3. ACTIONS OF SELLER AND CONDUCT OF BUSINESS:
(a) Seller shall use its reasonable best efforts to perform and satisfy all
conditions to Closing to be performed or satisfied by Seller under this
Agreement by the Closing Date or such other date by which performance is
required hereunder.
(b) From the date hereof through the Closing Date, unless otherwise agreed
in writing by Purchaser, (i) Seller shall not, and shall cause the Seller Group
(with respect to the Business) and the Purchased Subsidiaries not to, except as
required or expressly permitted pursuant to the terms hereof, enter into any
material transaction other than in the ordinary course of business and (ii)
Seller shall, and shall cause the Seller Group and the Purchased Subsidiaries
to, conduct the Business in the ordinary course of business and in a manner
substantially consistent with past practice. Prior to the Closing, Seller shall
use commercially reasonable best efforts to keep available the services of the
current employees of the Purchased Subsidiaries and to preserve for Purchaser
the goodwill of the customers and suppliers of the Business and others having
business relations with Seller with respect to the Business, and shall do all
things commercially reasonable requested by Purchaser for such purpose and
consistent with Seller's obligations hereunder. Prior to the Closing, Seller
shall advise Purchaser as promptly as practicable in writing of the commencement
of any material suit, litigation or legal proceeding against Seller with respect
to the Business or the Purchased Subsidiaries or with regard to the transactions
contemplated hereby. Prior to the Closing, Seller shall use commercially
reasonable best efforts to cause all casualty and liability insurance coverage
listed on Schedule 8.18 to remain in effect
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(or to obtain comparable coverage) and apply all insurance proceeds in respect
of casualty to the Target Assets or assets of the Purchased Subsidiaries to the
replacement or rebuilding of such Target Assets or assets of the Purchased
Subsidiaries.
(c) Without limiting the generality of the foregoing, from the date hereof
through the Closing Date, unless otherwise agreed in writing by Purchaser (such
approval not to be unreasonably withheld, delayed or conditioned), unless as
specifically set forth on Schedule 7.3(c), in connection with the arrangements
described in Section 4.3(d)(i), the restructuring projects in Section
4.4(b)(iv), in connection with the Cash Extraction Plan described in Schedule
7.15, as amended pursuant to Section 7.15, in connection with the Divestiture,
in connection with the conversion of each of the Purchased Subsidiaries
organized under the laws of a state in the United States, other than Worcester
Controls Licensco Inc. and PMV Inc., into a limited liability company organized
under the laws of a state in the United States (a "U.S. LLC") or in connection
with the extraction from the Business of the asset described in Section 1.2(m),
Seller shall not, with respect to the Business, and shall not permit any
Purchased Subsidiary (or seller of Target Assets with respect to such assets)
to:
(i) authorize for issuance, issue, deliver, sell, pledge, redeem or
otherwise encumber the share capital of any Purchased Subsidiary, any other
voting securities of any Purchased Subsidiary or any securities convertible
into, or any rights, warrants or options to acquire any shares, voting
securities or convertible securities or any other securities or equity
equivalents of any Purchased Subsidiary (including, without limitation,
stock appreciation rights);
(ii) sell, lease, license or otherwise dispose of, or agree to sell,
lease, license or otherwise dispose of, any interest in any of the
Purchased Subsidiaries or material assets held by any Purchased
Subsidiaries or any material Target Assets except for sales or dispositions
of inventory or of obsolete or worn-out assets in the ordinary course of
business, consistent with past practice;
(iii) subject any of the Target Assets, Purchased Subsidiaries or
aggregate amount of material assets held by any Purchased Subsidiary to any
material mortgage, pledge, security interest, encumbrance or lien or suffer
such to be imposed, except for Permitted Liens;
(iv) except in the ordinary course of business, consistent with past
practice, or as required by law or pursuant to the terms of a Collective
Bargaining Agreement (a) increase in any manner the compensation of, or
enter into any new bonus, termination, stay bonus, severance or incentive
agreement or arrangement with, any of the Business Employees (as defined in
Section 8.10(a)) or Former Employees (as defined in Section 8.10(a)), (b)
commence, enter into or amend any U.S. Benefit Plan (as defined in Section
8.10(a)) or Foreign Plan in a manner that materially increases the benefits
or costs thereunder, or (c) enter into or amend any collective bargaining
employment, consulting or service agreement with respect to the Business;
(v) make any capital expenditures exceeding, in the aggregate,
$1,000,000, or individual expenditures exceeding $250,000;
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(vi) make any election regarding Taxes other than in a manner
consistent with past practice, execute any waiver of restrictions on
assessment or collection of any Tax, or settle or compromise any Tax
Matter, in any case, that either (x) would reasonably be expected to
increase the Taxes for which Purchaser or any of its Affiliates (including
the Purchased Subsidiaries) would be liable under Article XVII or (y) would
have a binding effect on Purchaser or any of its Affiliates (including the
Purchased Subsidiaries) in a Post-Closing Tax Period; provided, however,
that Seller shall notify Purchaser in writing of any -------- ------- such
election, waiver, settlement or compromise that is not described in clause
(x) or clause (y) at least 10 Business Days prior to making (or causing to
be made) such election, waiver, settlement or compromise;
(vii) except in the ordinary course of business, consistent with past
practice (a) sever or terminate any of the Business Employees or (b) hire
any Business Employees or transfer the employment of any individual to or
from a Purchased Subsidiary;
(viii) take, or agree in writing or otherwise to take, any of the
actions described in this Section 7.3, or any action which would or could
reasonably be expected to cause the representations and warranties of
Seller contained in this Agreement to not be true and correct in all
material respects, or, with respect to the representations and warranties
of Seller contained herein that are limited by materiality, to not be true
and correct in all respects;
(ix) incur or assume any liabilities, obligations or indebtedness for
borrowed money or guarantee any such liabilities, obligations or
indebtedness, other than in the ordinary course of business and consistent
with past practice; provided, however, that in no event shall any Purchased
Subsidiary incur or assume any long-term indebtedness for borrowed money;
(x) cancel any material indebtedness owed to any Purchased Subsidiary
by an unaffiliated third party;
(xi) other than in the ordinary course of business, pay, loan or
advance any amount to, or sell, transfer or lease any of its assets to, or
enter into any agreement or arrangement with, Seller or any of its
Affiliates that are not Purchased Subsidiaries or their directors, officers
or employees;
(xii) make any change in any method of accounting or accounting
practice or policy other than those required by U.K. GAAP;
(xiii) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization
or division;
(xiv) enter into any lease of real property in excess of 10,000 square
feet, except any renewals of existing leases in the ordinary course of
business and consistent with past practice; or
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(xv) modify, amend, terminate or fail to exercise any option to renew
in accordance with its terms any lease of, or other material agreement
relating to, real property (except modifications or amendments associated
with renewals of existing leases or lease termination in the ordinary
course of business and consistent with past practice).
(d) From the date hereof through the Closing Date, Seller shall cause the
Purchased Subsidiaries to use commercially reasonable efforts to maintain their
respective assets, and shall cause the Seller Group to use commercially
reasonable efforts to maintain the Target Assets, in each case in the ordinary
course of business in good operating order and condition, reasonable wear and
tear excepted; and maintain the level and quality of inventory and supplies, raw
materials and spare parts in the ordinary course in a manner consistent with
past practices in place as of the date of the Balance Sheet.
7.4. ACTIONS OF PURCHASER: Purchaser shall use its reasonable best efforts to
perform and satisfy all conditions to Closing to be performed or satisfied by
Purchaser under this Agreement by the Closing Date or such other date by which
performance is required hereunder. Purchaser shall use its reasonable best
efforts to obtain the financing contemplated in the Commitment Letters and to
comply with its obligations under the Commitment Letters and cause the
conditions precedent under its control contained therein to be satisfied
(including, without limitation, by paying negotiated fees to obtain any required
approvals of the Required Lenders (as defined in the Commitment Letters)).
7.5. PUBLIC ANNOUNCEMENTS: Except as may be required by applicable law or the
rules of the New York Stock Exchange (the "NYSE"), the U.K. Listing Authority or
the London Stock Exchange, no announcement or circular in connection with the
subject matter of this Agreement shall be made or issued by or on behalf of
Seller or any member of Seller Group, on the one hand, or Purchaser or the
Purchaser Designees, on the other hand, without the prior written consent of the
other as to its contents, timing and the manner of its presentation and
publication. For the avoidance of doubt, nothing in this Section 7.5 shall be
deemed to prohibit any party hereto, following review with the other party, from
making any disclosure which its counsel reasonably deems necessary in order to
fulfill such party's disclosure obligations imposed by law, including, without
limitation, the Securities Act of 1933, as amended (the "Securities Act"), and
the Securities Exchange Act of 1934, as amended, or other rules or regulations
of the Securities and Exchange Commission or the rules of the NYSE, the London
Stock Exchange, the City Code on Mergers and Takeovers or the U.K. Listing
Authority.
7.6. NO NEGOTIATIONS: Prior to the Closing, Seller shall not, and shall cause
each of its Affiliates and each of their respective officers, directors,
employees and representatives to not, directly or indirectly, solicit or enter
into negotiations or discussions of, or encourage the submission of, any
proposal or offer of any kind with any party, other than Purchaser, for the
purchase and sale of all or any portion of the Business or any of the Target
Assets or Purchased Subsidiaries except with regard to the sale or disposition
of inventory or obsolete or worn-out assets in the ordinary course of business.
Seller will notify Purchaser if any third party makes any proposal, offer,
inquiry or contact with respect to any of the foregoing within two (2) Business
Days after such receipt of any such offer or proposal.
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7.7. SECTION 116 CERTIFICATE: Seller shall use its reasonable best efforts to
deliver to Purchaser on or prior to the Closing Date a certificate (the "116
Certificate") in the name of BTR Canada Holdings, Inc. issued under section 116
of the Income Tax Act (Canada), in connection with the sale by BTR Canada
Holdings, Inc. of the shares of Canadian Worcester Controls Limited, setting
forth a certificate limit in an amount not less than the Purchase Price in
respect of the shares of Canadian Worcester Controls Limited. If the 116
Certificate is not delivered to Purchaser on or prior to the Closing Date,
Purchaser shall be entitled to withhold from the Purchase Price in respect of
Canadian Worcester Controls Limited, payable at the time of the Closing, an
amount equal to 25% of the Purchase Price for the shares of Canadian Worcester
Controls Limited, such amount is required to be held in escrow pursuant to an
escrow agreement among the parties, substantially in the form attached hereto as
Exhibit B (the "Escrow Agreement").
7.8. FIRPTA CERTIFICATE; FORM W-8BEN: Seller shall deliver to Purchaser at or
prior to the Closing (a) duly executed and acknowledged certificates
substantially in the form set forth in Schedule 7.8(a) or Schedule 7.8(b), as
applicable, certifying such facts that establish that the sale of the share
capital of the Target Subsidiaries are exempt from withholding under Section
1445 of the Code and (b) a duly completed and properly executed Internal Revenue
Service Form W-8BEN certifying that (i) Seller is the beneficial owner of the
payment in consideration of Seller's Entry into the Non-Competition Agreement
referred to in Section 3.1, (ii) Seller is qualified for benefits under the
provisions of the Income Tax Treaty between the United States and the United
Kingdom (the "Treaty") and (iii) such payment is exempt from United States
withholding Tax under the Treaty.
7.9. TRANSITION SERVICES: Each of Purchaser and Seller agrees to negotiate in
good faith to enter into at the Closing an agreement for transition services
(the "Transition Services Agreement") pursuant to which Seller would agree to
provide to Purchaser, upon mutually agreed terms, mutually agreed support
services which may be required for the transition of the Business to Purchaser.
Such Transition Services Agreement shall provide, among other things, that
Seller shall be reimbursed for (x) all out-of-pocket costs in connection with
the provision of such services and (y) a pro rata portion of the employment
costs (i.e., salary and fringe benefits) of employees providing such services
plus, an amount equal to 5% of such employment costs, and shall provide for a
term of six months.
7.10. CASH POOLING ARRANGEMENTS: Prior to the Closing, Seller shall cause any
Purchased Subsidiary that participates in any of Seller's cash pooling
arrangements to be removed from such arrangement and to cause any obligations or
undertakings of such Purchased Subsidiaries to be cancelled.
7.11. ADVISE OF CHANGES: Each party to this Agreement shall give prompt notice
to the other party of any event, transaction or circumstance, to the extent
known by such party, the occurrence, or failure to occur, of which has caused or
could reasonably be expected to cause any of the conditions to the other party's
obligations to close set forth in Articles X or XI hereof, as applicable, not to
be satisfied.
7.12. RECORDS: On the Closing Date, Seller shall deliver or cause to be
delivered to Purchaser or a Purchased Subsidiary all Purchased Records (as
defined in Section 13.1), plus all
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original agreements, documents, books, records and files, including records and
files stored on computer disks or tapes or any other storage medium
(collectively, "Records"), if any, in the possession of Seller or any of its
Affiliates relating to the business and operations of the Business, subject to
the following exceptions:
(i) Purchaser recognizes that certain Records may contain incidental
information relating to the Business or may relate primarily to
subsidiaries, divisions or businesses of Seller other than the Business,
and that Seller may retain such Records and shall provide copies of the
relevant portions thereof to Purchaser; and
(ii) Seller may retain all Records prepared in connection with the
sale of the Business, including bids received from other parties and
analyses relating to the Business.
7.13. NAMES FOLLOWING CLOSING: Except as otherwise provided in Section 15.9,
Seller shall, and shall cause its affiliates to, promptly following the Closing,
terminate any certificate of assumed name or d/b/a filings (or amend any
certificate of incorporation or certificate of incorporation on change of name)
and, within three months of the Closing Date, shall cease to use, or cause its
affiliates to cease to use, upon, in, or in relation to any marketing materials,
promotional materials, signage at places of business and, to the extent
reasonably practicable, directory entries, the names listed on Schedule 7.13
and/or any of the trademarks (whether registered or unregistered) assigned to
the Purchaser or the Purchaser Designees pursuant to this Agreement, in each
case so as to eliminate the Seller's, or the relevant affiliate's, right to use
such names and trademarks or any name or trademark that, in the reasonable
judgment of Purchaser, is confusingly similar to any such names or trademarks,
and Seller shall not, nor shall it permit its affiliates, thereafter to use
those names or trademarks or any names or trade marks confusingly similar
thereto (provided always that the Seller and its affiliates shall be entitled to
use the Argus trademark in accordance with Section 15.9 hereof.)
7.14. UPDATED FINANCIAL STATEMENTS:
(a) Seller shall use reasonable best efforts to provide to the Purchaser
such updates or additions to the Financial Statements (as defined in Section
8.4) as are requested by Purchaser and necessary to allow the Purchaser to
properly include such Financial Statements under Regulation S-X of the
Securities Act in a registered debt or equity offering by the Purchaser the
purpose of which is to finance the acquisition of the Business. Such updates and
additions shall include such financial statement or footnote disclosure relating
to the Business as is required under Regulation S-X with respect to guarantor
and non-guarantor entities (assuming all U.S. entities included in the Business
will be guarantors and all U.S. assets of the Business will be acquired by
guarantors) ("Guarantor/Non-Guarantor Information").
(b) Seller shall use reasonable best efforts to deliver to Purchaser no
later than May 15, 2002 the audited combined balance sheet of the Business at
March 31, 2002 and related audited statements of income and cash flows of the
Business for the year ended March 31, 2002, including the notes thereto,
prepared in accordance with U.K. GAAP and including a footnote that provides
differences between U.K. GAAP and U.S. GAAP as included in the Financial
Statements. Such financial statements shall be in a form and shall include such
Guarantor/Non-Guarantor Information as would be required under Regulation S-X to
be included in a registered debt or equity
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offering by the Purchaser the purpose of which is to finance the acquisition of
the Business.
(c) Seller shall otherwise reasonably cooperate with the Purchaser in
connection with the Purchaser's contemplated financing transactions to finance
its acquisition of the Business. Such cooperation shall include Seller using its
commercially reasonable best efforts to cause Ernst & Young to provide the
Purchaser with a consent to include the Financial Statements (as they may be
updated from time to time by the Seller pursuant to clause (a) and (b) above) in
a registration statement or private placement memorandum prepared by the
Purchaser in connection with its contemplated financing transactions and provide
a customary comfort letter (including customary negative assurance) to the
underwriters in any such financing transaction
7.15. DIVESTITURE OF UNACQUIRED SUBSIDIARIES; CASH EXTRACTION: Prior to Closing,
Seller shall, or shall cause its Affiliates to, remove any entities that are not
Purchased Subsidiaries but that are held by the Purchased Subsidiaries from the
ownership and control of the Purchased Subsidiaries (the "Divestiture"). The
Divestiture shall have been undertaken in compliance with applicable law and in
a manner that is not adverse to any of the Purchased Subsidiaries and that does
not create any obligations on the part of any of the Purchased Subsidiaries.
Prior to Closing, Seller shall, or shall cause its Affiliates to, remove the
cash from the Purchased Subsidiaries permitted or required to be removed
therefrom by this Agreement pursuant to the principles and anticipated steps
planned as of February 28, 2002 as described in Schedule 7.15 (the "Cash
Extraction Plan"). The Cash Extraction Plan may be amended by Seller from time
to time with the consent of Purchaser (such consent not to be unreasonably
withheld, delayed or conditioned), in order to effectuate the principles and
anticipated steps described in Schedule 7.15. The Cash Extraction Plan shall
have been undertaken in compliance with applicable law and in a manner that is
not adverse to any of the Purchased Subsidiaries and that does not create any
obligations on the part of any of the Purchased Subsidiaries.
7.16. REQUIRED NOTICES: Purchaser will, promptly upon request, provide Seller
with all information necessary such that Seller is able to inform, or cause the
appropriate Purchased Subsidiary, as required, to inform and consult their
respective works councils or other employee representative bodies in accordance
with Section 8.28.
7.17. ADDITIONAL LEASES:
(a) Each of Purchaser and Seller agree to negotiate in good faith to enter
into (or cause their appropriate subsidiaries to enter into) at Closing a lease
agreement with respect to the property at Walsroder Str. 9, 11, 13 and 15,
Munchner Str. 67, 77 and 79 and Hemmstr 130 in Bremen, Germany (the "Gestra
Sublease") containing the following terms (i) a term of 10 years, provided that
Purchaser may terminate such lease on the twelve month anniversary of the
Closing by delivering written notice of such termination to Seller on or prior
to the eleven month anniversary of the Closing and that Purchaser may terminate
such lease any time after the fourth anniversary of the Closing Date by
delivering written notice of such termination to Seller at least six months
prior to the date of termination and (ii) a fair market value rent (to be
determined by a mutually agreed independent expert if the parties are unable to
agree on such fair market value), provided that the rent for the first year of
the lease shall be zero, and such other terms as may be mutually agreed by the
parties.
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(b) Each of Purchaser and Seller shall agree to negotiate in good faith to
enter into (or cause their appropriate subsidiaries to enter into) at Closing a
lease agreement with respect to the property at 8411 Hacks Cross Road, Olive
Branch, Mississippi, pursuant to which a subsidiary of Seller would lease such
property to a subsidiary of Purchaser for the one-year period commencing on the
Closing. There shall be no rent charge for such lease. At the conclusion of such
one-year period, at the request of Purchaser, Purchaser and Seller shall
negotiate in good faith to enter into a lease with respect to such property on
mutually agreed terms.
ARTICLE VIII.
Representations and Warranties of Seller
Seller hereby represents and warrants to Purchaser as follows:
8.1. ORGANIZATION AND AUTHORITY: Seller is a public company duly incorporated
and validly existing under the laws of England and Wales. Seller and each member
of the Seller Group has all requisite corporate power and authority to (i) own,
lease and operate its properties and assets, including the Target Subsidiaries
and to carry on its business as it is now being conducted; (ii) execute and
deliver this Agreement, in the case of Seller, and all other agreements,
instruments and documents, including the Transfer Agreements, (the "Related
Documents") to be delivered by it hereunder; (iii) perform the obligations to be
performed by it hereunder and thereunder; and (iv) consummate the transactions
contemplated hereby and thereby.
8.2. PURCHASED SUBSIDIARIES: Except for the stock or other proprietary interests
of the subsidiaries of the Target Subsidiaries and their subsidiaries listed on
Schedule 8.2 (the Target Subsidiaries together with such listed subsidiaries,
the "Purchased Subsidiaries"), the Purchased Subsidiaries do not currently own
any capital stock or other proprietary interest, directly or indirectly, in any
corporation or other entity or interest in any joint venture. Schedule 8.2 sets
forth the name and the jurisdiction of organization with respect to each
Purchased Subsidiary. Each Purchased Subsidiary (i) is a corporation or other
legal entity duly organized or formed, where applicable, is in good standing and
validly existing under the laws of its jurisdiction of organization; (ii) has
all requisite corporate or other entity power and authority to own, lease or
otherwise hold and operate its properties and assets including the Purchased
Subsidiaries that are its subsidiaries and to carry on its business as now being
conducted; and (iii) to the extent applicable, is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the character of the properties owned or leased or otherwise held by it or the
nature of the business conducted by it makes such qualification necessary,
except in the case of this clause (iii), for any non-qualification which does
not have a Material Adverse Effect (as defined below) on the Business. For
purposes of this Agreement, the term "Material Adverse Effect" means any change
or effect that, individually or taken together with all other related changes or
effects occurring prior thereto, is or is reasonably likely to be materially
adverse to (i) the business, assets, financial condition or results of
operations of the Business taken as a whole; (ii) the ability of Seller to
perform its obligations under this Agreement and the Related Documents or (iii)
on the ability of Seller to consummate the transactions contemplated hereby.
True and complete copies of the articles of incorporation and by-laws or other
constituent documents of each member of the Seller Group and each Purchased
Subsidiary, including in
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each case all amendments thereto, have been made available in all material
respects to Purchaser. All the outstanding shares of the capital stock of each
class of each Purchased Subsidiary have been duly authorized, validly issued
and, except as set forth on Schedule 8.2, are fully paid and nonassessable and
are owned, beneficially and of record by Seller or a Target Subsidiary free and
clear of any Encumbrances, and upon the delivery of any payment for such shares
at Closing as provided for herein and payment of any stamp duty, stamp duty
reserve tax or other similar tax or duty (if any), each of the Share Purchasers
will acquire good and valid title thereto, free and clear of any Encumbrances.
Schedule 8.2 sets forth for each Purchased Subsidiary the record and beneficial
owners of its outstanding capital stock or other ownership interests. Except as
set forth on Schedule 8.2, none of the Purchased Subsidiaries has issued any
securities, limited liability company interests or other ownership interests in
violation of any preemptive or similar rights and there are no outstanding (i)
securities or other ownership interests convertible into or exchangeable for any
shares of capital stock or other ownership interest of any of the Purchased
Subsidiaries; (ii) subscriptions, options, warrants, calls, commitments,
preemptive rights or other rights of any kind (absolute, contingent or
otherwise) entitling any third party to acquire or otherwise receive from any of
the Purchased Subsidiaries any shares of capital stock or other securities or
ownership interests; or (iii) contracts, commitments, agreements, understandings
or arrangements of any kind relating to the issuance of any capital stock or
ownership interests of any of the Purchased Subsidiaries, any such convertible
or exchangeable securities, or any such subscriptions, options, warrants or
rights. There are no shares of stock or other securities, limited liability
company interests or other ownership interests of the Purchased Subsidiaries
reserved for issuance for any purpose. As of the date of this Agreement, there
are not any outstanding contractual obligations of Seller or any of its
Affiliates, including the Purchased Subsidiaries, to repurchase, redeem or
otherwise acquire any shares of capital stock or other ownership interest of any
Purchased Subsidiary.
8.3. CORPORATE ACTION; NO CONFLICT: The execution, delivery and performance by
Seller of this Agreement and the Related Documents and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action of Seller. This Agreement has been duly and validly
executed and delivered by Seller and is, and each of the Related Documents when
executed and delivered by Seller in accordance with its terms will be, the valid
and binding obligation of Seller, enforceable against Seller in accordance with
their respective terms, except as limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights generally. Except as
set forth in Schedule 8.3, neither the execution, delivery or performance by
Seller of this Agreement or any of the Related Documents, nor the consummation
by Seller and members of the Seller Group of the transactions contemplated
hereby or thereby, nor compliance by Seller with any provision hereof or thereof
will (i) conflict with or result in a breach of any provision of the
constitutional documents of Seller, any member of the Seller Group or any
Purchased Subsidiary; (ii) violate any provision of law, statute, rule or
regulation, or any order, writ, injunction, permit, judgment or decree of any
court or other governmental or regulatory authority (except where such
violations would not, or could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Business); (iii) except as
would not, or could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Business, result in a breach
of, or constitute a default under (with or without notice, lapse of time or
both) or result in the invalidity of, or accelerate the performance required by
or cause or give rise to any right of acceleration or termination of any right
or obligation pursuant to, or require the consent of the other party to,
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any Assigned Contract or any contract or agreement of the Business; (iv) result
in the creation of, or with the passage of time result in the creation of, any
Encumbrance upon any assets or properties of the Business which would, or could,
reasonably be expected to have a Material Adverse Effect on the Business; or (v)
require the Seller, any member of the Seller Group or any Purchased Subsidiary
to obtain any consent, approval, license, permit, order or authorization of or
make any registration, declaration or filing with any Federal, state, local or
foreign government or any court of competent jurisdiction, administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Authority"), except as may be required under the HSR
Act or to obtain any Competition Approvals (as defined in Section 10.3) or
except where the failure to obtain any such consent or make any such filing
would not, individually or in the aggregate, prevent, materially delay or impair
the ability of Seller to consummate the transactions contemplated hereby.
8.4. FINANCIAL STATEMENTS AND RELATED MATTERS: Set forth in Schedule 8.4 hereto
is the audited combined balance sheet of the Business at March 31, 2000 and 2001
and the unaudited combined balance sheet of the Business at December 31, 2001
and 2000 and related audited statements of income and cash flows of the Business
for the years ended March 31, 2000 and 2001 and the related unaudited statements
of income and cash flows of the Business for the nine months ended December 31,
2001 and 2000. Such financial statements are collectively referred to herein as
the "Financial Statements." The Financial Statements have been prepared in
accordance with generally accepted accounting principles in the United Kingdom
("U.K. GAAP"), except that such unaudited Financial Statements do not contain
all of the footnotes required under U.K. GAAP, but do contain comparatives and a
reconciliation to generally accepted accounting principles in the United States
("U.S. GAAP") as to certain items and a description of material differences
between U.K. GAAP and U.S. GAAP as applied to the Financial Statements. The
Financial Statements, including the notes thereto, fairly present, in all
material respects, the financial condition and results of operations of the
Business, as of and for the periods to which they relate. The Business has no
direct or indirect liabilities, losses or obligations of any nature, whether
absolute, accrued, contingent or otherwise, that (x) would be required to be
reflected on a balance sheet or in the notes thereto prepared in accordance with
U.K. GAAP consistently applied and (y) that are material to the Business taken
as a whole other than (i) liabilities reflected, accrued or reserved for in the
Financial Statements; (ii) liabilities disclosed in the Schedules to this
Agreement; (iii) liabilities incurred in the ordinary course of business
subsequent to December 31, 2001 and not inconsistent with past practice; or (vi)
liabilities under this Agreement.
8.5. REAL PROPERTY:
(a) Schedule 8.5(a)(i) sets forth a list of all real property owned by the
Purchased Subsidiaries. Schedule 8.5(a)(ii) sets forth a list of all real
property owned by any member of the Seller Group and their Affiliates (excluding
the Purchased Subsidiaries) used in, held for use in or pertaining to the
Business (such properties appearing on Schedule 8.5(a)(i) and 8.5(a)(ii), the
"Owned Real Property"). Except for Permitted Liens and the matters listed on
Schedule 8.5(a)(i) (collectively, the "Permitted Owned Real Property
Exceptions"), Seller or a Purchased Subsidiary has good, marketable and
insurable fee simple title to the Owned Real Property, free and clear of all
Encumbrances. To the Knowledge of Seller, none of the Permitted Owned Real
Property Exceptions, individually or in the aggregate, materially impairs, or
could reasonably be
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expected materially to impair, the continued use and operation of the Owned Real
Property to which they relate in the conduct of the Business as presently
conducted.
(b) Schedule 8.5(b)(i) sets forth a list of all leased real property
occupied by the Purchased Subsidiaries and Schedule 8.5(b)(ii) sets forth a list
of all leased real property occupied by any member of the Seller Group (other
than the Purchased Subsidiaries), in each case as used in, held for use in or
pertaining to the Business (such properties appearing on Schedule 8.5(b)(i) and
8.5(b)(ii), the "Leased Real Property" and, together with the Owned Real
Property, the "Real Property"). Except as could not reasonably be expected to
have a Material Adverse Effect on the Business, all of the leases with respect
to the Leased Real Property (the "Leases") are in full force and effect and no
member of Seller Group, or any Purchased Subsidiary (nor, to Seller's Knowledge,
any other party) has received a written notice of default or termination with
respect to any Lease. All Leases constituting Target Assets are assignable
without the consent of any third party except as listed on Schedule 8.5(b)(ii)
hereto or as could not reasonably be expected to have a Material Adverse Effect
on the Business.
(c) Except as could not reasonably be expected to have a Material Adverse
Effect on the Business, (i) no person is entitled to any option, right over,
interest in, right of pre-emption, first refusal, surrender or determination
relating to any of the Owned Real Property nor is any person in the course of
acquiring any of these; (ii) Seller, a member of the Seller Group or a Purchased
Subsidiary has paid all rent or license fees which have become due in respect of
any of the Leased Real Property; and (iii) where the rent reserved by the lease
or tenancy of any Leased Real Property is subject to review, all rent review
notices have been served within any requisite time limits and there are no
disputes outstanding as to the settlement of the relevant level of rent. To the
Knowledge of Seller, neither Seller, any member of Seller Group nor any
Purchased Subsidiary has received any written notice of any subsisting breach,
any non-observance of any covenant, condition of agreement contained in the
Leases on the part of Seller, a member of the Seller Group or a Purchased
Subsidiary.
(d) None of Seller, any member of Seller Group, or any Purchased Subsidiary
has received any written, or to the Knowledge of Seller, non-written, notice of
any (i) annexation or condemnation or similar proceeding affecting all or any
portion of any Real Property, (ii) proposed or pending proceeding to change or
redefine the zoning classification of all or any portion of any Real Property
which would have a Material Adverse Effect on the Business or significantly
restrict the use of that Real Property, or (iii) pending imposition of any
material special or other assessments for which Purchaser or a Purchased
Subsidiary would be responsible.
(e) Except as could not reasonably be expected to have a Material Adverse
Effect on the Business, (i) there is access between each Owned Real Property and
public roads, and there are no claims, suits, actions, investigations,
examinations, audits, indictments or information, or administrative, arbitration
or other similar proceedings (all of the foregoing, "Proceedings") that could
have the effect of impairing or restricting such access; and (ii) there are no
material defects in the roof, foundation, sprinkler mains, structural,
mechanical, and HVAC systems and masonry walls in any of the improvements upon
each Real Property, no significant repairs thereof are required, and all
periodic maintenance has been done and is being done consistent
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with industry maintenance standards for real property of similar size and age in
the vicinity of such Real Property.
8.6. TANGIBLE ASSETS OTHER THAN OWNED REAL PROPERTY: Other than Owned Real
Property, which is the subject of Section 8.5 hereof, Seller, the members of the
Seller Group, and the Purchased Subsidiaries have, or will have at Closing,
title to all the tangible assets of the Purchased Subsidiaries and all the
tangible assets included within the Target Assets set forth on Schedule
1.1(a)(ii), including the personal property acquired after the date of this
Agreement, except those sold or otherwise disposed of in the ordinary course of
business consistent with Section 7.3(c)(ii) (the "Personal Property"), free and
clear of all Encumbrances, except for Permitted Liens and those tangible assets
subject to leases. Upon the delivery of any payment for such Personal Property
at Closing as provided for herein, the Business Purchasers will acquire good and
valid title thereto, free and clear of any Encumbrances except for Permitted
Liens and those tangible assets subject to Leases. All material personal
property included in the Target Assets and Purchased Subsidiaries is in good
working order and condition, ordinary wear and tear excepted, and has been
maintained in accordance with the past practice of the Business and with normal
commercial practice in all material respects. Except for the Excluded Assets,
the Purchased Assets comprise all assets necessary to operate the Business as
presently conducted in all material respects. All material leased personal
property of the Business is in all material respects in the condition required
of such property by the terms of the lease applicable thereto.
8.7. CONTRACTS, CUSTOMERS AND SUPPLIERS:
(a) Schedule 8.7(a) lists all material contracts and agreements, relating
to or affecting the Business which extend beyond the Closing Date to which
Seller or any of its Affiliates is a party (other than purchase orders and sales
orders entered into in the ordinary course of business and contracts which
(unless otherwise specifically indicated) by their terms terminate or are
unconditionally terminable by Seller or its Affiliates without penalty within
three months or which individually involve a commitment of less than $1,000,000
in any fiscal year) which fall into one or more of the following categories:
(i) any contract or agreement, or any note, bond, debenture or other
evidence of indebtedness under which Seller, any member of the Seller
Group, or any Purchased Subsidiary has created, incurred, assumed or
guaranteed (or may create, incur, assume or guarantee) indebtedness for
borrowed money or under which Seller or any Purchased Subsidiary has
granted an Encumbrance on any Target Assets or Purchased Subsidiaries to
secure such indebtedness;
(ii) any lease of personal property;
(iii) any contract or agreement containing covenants limiting the
freedom of the Business or the Purchased Subsidiaries to engage in any line
of business or compete with any person or in any geographical market;
(iv) any contract or agreement pursuant to which any intellectual
property is licensed or sublicensed to or from any person;
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(v) any contract or agreement granting any person any right to market,
distribute or resell any products of the Business, or to act as agent for
the Business in connection with the marketing, distribution or sale of any
products of the Business;
(vi) any contract or agreement establishing or making a Purchased
Subsidiary a participant in any joint venture, strategic alliance or other
collaboration;
(vii) any contract or agreement for the sale of products or services
of the Business;
(viii) any contract or agreement for the purchase of any raw
materials, components or services;
(ix) any mortgage, indenture, security agreement, pledge, note, loan
agreement or guarantee of indebtedness to which a Purchased Subsidiary is
party;
(x) any contract or agreement (including any so-called take-or-pay or
keepwell agreements) under which any unaffiliated third party has directly
or indirectly guaranteed indebtedness, liabilities or obligations of any
Purchased Subsidiary;
(xi) any contract or agreement under which any Purchased Subsidiary
has, directly or indirectly, made any material advance, loan, extension of
credit or capital contribution to, or other investment in, any person
(other than another Purchased Subsidiary) other than extensions of trade
credit in the ordinary course of business;
(xii) any contract or agreement (including a sales order) involving
the obligation of one or more Purchased Subsidiaries to deliver products or
services for payment of more than $1,000,000 or extending for a term of
more than 180 days from the date of this Agreement (unless terminable
without payment or penalty upon no more than 60 days' notice), other than
sales orders entered into in the ordinary course of business;
(xiii) any contract or agreement for the sale of any Target Asset or
asset of a Purchased Subsidiary (other than inventory sales in the ordinary
course of business) or the grant of any preferential rights to purchase any
such asset, except for the sales or dispositions of inventory or of
obsolete or worn-out assets in the ordinary course of business, consistent
with past practice;
(xiv) any material contract or agreement with any governmental entity;
(xv) any currency exchange, interest rate exchange, commodity exchange
or similar contract to which a Purchased Subsidiary is party; and
(xvi) any other contract or agreement to which a Purchased Subsidiary
is party that has an aggregate minimum future liability to any person
(other than a Purchased Subsidiary) in excess of $1,000,000 and is not
terminable by the Purchased Subsidiary by notice of not more than 60 days
for a cost of less than $50,000 (other than purchase orders and sales
orders)
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(collectively, the "Material Contracts"). Except as set forth on Schedule
8.7(a), Seller and each Purchased Subsidiary have performed all the obligations
required to be performed by them to date under the Material Contracts, and are
not (with or without the lapse of time or the giving of notice or both) in
default or breach in any respect under any Material Contract except for failures
to perform or defaults which do not materially impair the ability of the
Business to conduct its operations as heretofore conducted. To the Seller's
Knowledge, no other party to any Material Contract is (with or without the lapse
of time or the giving of notice or both) in default or breach in any respect
under any Material Contract except for failures to perform or defaults which do
not materially impair the ability of the Business to conduct its operations as
heretofore conducted. Seller has made available to Purchaser true and correct
copies of all Material Contracts and, with respect to Material Contracts entered
into after the date of this Agreement, will make copies of such contracts
available prior to Closing.
(b) All of the Material Contracts (i) are legal, valid and binding
obligations of the Business enforceable (except as enforcement may be limited by
equitable principles limiting the right to obtain specific performance or other
equitable remedies or by applicable bankruptcy or insolvency laws and related
decisions affecting creditors' rights generally) against the Purchased
Subsidiaries or a member of the Seller Group; (ii) have been negotiated in good
faith on an "arm's-length" transaction basis; (iii) are, to the Knowledge of
Seller, enforceable against the other parties in accordance with their
respective terms; and (iv) constituting Target Assets are assignable without the
consent of any third party except as listed on Schedule 8.3 attached hereto and
made a part hereof. Except as listed on Schedule 8.7(b) hereto, none of the
Purchased Subsidiaries or members of the Seller Group have received or given
written notice of any default or claimed, purported or alleged default or state
of facts which, with notice or lapse of time or both, would constitute a default
on the part of any party in the performance or payment of any of the Material
Contracts.
(c) A list of the ten largest customers (in terms of revenue or turnover)
and ten largest suppliers (in terms of supplies expensed during the year) of the
Business (by dollar amounts) for the year ended March 31, 2001 is set forth in
Schedule 8.7(c). Except as set forth in Schedule 8.7(c), neither the Seller nor,
to its Knowledge, any officer, director, or Affiliate of Seller owns any
interest in any person or entity which is a supplier or customer of the Business
(other than less than 5% of interests in publicly traded companies) or has any
contractual arrangements with the Business (other than contractual arrangements
between any Seller or any subsidiary of Seller, on one hand, and the Business,
on the other hand). All purchase and sale orders and other commitments for
purchases and sales made by the Purchased Subsidiaries and members of the Seller
Group in connection with the Business have been made in the ordinary course of
business in accordance with past practices, and no payments have been made to
any supplier or representative thereof other than payments to such suppliers for
the payment of the invoiced price of supplies purchased in the ordinary course
of business. Except as could not reasonably be expected to have a Material
Adverse Effect on the Business or as set forth in Schedule 8.7(c), since the
date of the most recent balance sheet delivered pursuant to Section 8.4 hereof,
there has not been (i) any material adverse change in the business relationship
of the Business or of any Purchased Subsidiary with any customer or supplier
named in Schedule 8.7(c) or (ii) any change in any material term (including
credit terms) of the supply agreements or sales agreements, as the case may be,
and related arrangements with any such supplier or customer. During the past 12
months, neither the Seller, any member of the Seller Group
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nor any Purchased Subsidiary has received any written customer complaint
concerning the products and services of the Business, nor has one of them had
any such products returned by a purchaser thereof, other than complaints and
returns in the ordinary course of business that, individually or in the
aggregate, have not had and could not reasonably be expected to have a Material
Adverse Effect.
8.8. LITIGATION: Except as set forth on Schedule 8.8, there are no Proceedings
pending, or, to the Knowledge of Seller threatened, and Seller has not received
written notice of any pending investigation against Seller, any member of the
Seller Group, or any Purchased Subsidiary or the directors, officers, agents or
employees of any of them affecting the Business, Target Assets, Purchased
Subsidiaries, or Assumed Liabilities, or seeking to prohibit or restrain the
transactions contemplated by this Agreement, at law or in equity or before or by
any court or other governmental agency or instrumentality, in the United
Kingdom, United States or any other jurisdiction or any arbitral body, in each
case an adverse outcome of which would have a Material Adverse Effect on the
Business or on the ability of Seller, in any material respect, to consummate the
transactions contemplated hereby. Except as set forth on Schedule 8.8, as of the
date hereof, there are no orders, writs, injunctions or decrees currently in
force which are specific to the Business which (x) seek to prohibit or restrain
the transactions contemplated by this Agreement or (y) would have a Material
Adverse Effect on the Business or on ability of Seller, to consummate the
transactions contemplated hereby. Except as set forth on Schedule 8.8, to the
Knowledge of Seller, none of the Purchased Subsidiaries is a party or subject to
or in default under any judgment, order or decree ("Judgment") that is material
and that has had or could reasonably be expected to have a Material Adverse
Effect on the Business.
8.9. COMPLIANCE WITH LAW:
(a) Except as set forth on Schedule 8.9, each of Seller and the members of
the Seller Group, with respect to the Business, and the Purchased Subsidiaries
is complying, in respect of its business, operations and properties, with
applicable law, except where such failure to comply would not, individually or
in the aggregate, be material to the Business.
(b) Each of Seller and the members of the Seller Group, with respect to the
Business, and the Purchased Subsidiaries has duly obtained, and hold or
possesses in their name, all permits, concessions, grants, franchises, licenses,
certificates and other governmental authorizations and approvals (collectively,
"Permits") issued or granted to the Purchased Subsidiary or included in the
Target Assets. Such Permits comprise all of the Permits necessary for the
conduct of the Business, and which Permits are in full force and effect, except
for those Permits the absence of which would not, or could not, or the failure
of which to be in full force and effect would not, or could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Business. There are no proceedings pending or, to the Knowledge of Seller,
threatened which may result in the revocation, cancellation, suspension or
modification of such Permits. Except as would not have a Material Adverse Effect
on the Business, none of such Permits will be subject to suspension,
modification, revocation or non-renewal as a result of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
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This Section 8.9 does not relate to environmental matters, which are the
subject of Section 8.13.
8.10. EMPLOYEE BENEFIT PLANS:
(a) For purposes of this Agreement, the "Benefit Plans" are all the
material employee benefit plans, policies and arrangements (whether or not
written, insured or self-insured), including, without limitation, each material
"employee benefit plan" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and each other material
profit sharing, compensation, fringe benefit, health, life, stock option,
phantom stock, stock appreciation right, bonus, deferred compensation, excess,
supplemental executive compensation, cafeteria, employee stock purchase,
vacation, sabbatical, sickness, post-retirement, disability, service award,
jubilee payment, severance, change in control, retention, individual employment,
consulting, bridge pension, retirement indemnity, collective bargaining or
similar arrangements with works councils, associations or similar organizations
("Collective Bargaining Agreements") or other material contract plan, policy,
arrangement, trust fund or agreement established, sponsored, maintained or
contributed to (or with respect to which any obligation to contribute has been
undertaken) by Seller or any ERISA Affiliate (as defined below) at any time
during the last six years with respect to Business Employees or Former Employees
or their beneficiaries or with respect to which Purchaser or any Purchaser
Subsidiary could have any primary or secondary liability; provided, however,
that, for purposes of Schedule 8.10(a), Schedule 8.10(f), Schedule 8.10(i)(i)
and Schedule 8.16 only, the term "Benefit Plan" shall not include any plan (or
contribution to a plan) that is maintained by a governmental or similar agency.
For purposes of this Agreement, an "ERISA Affiliate" is any entity that would be
deemed a "single employer" with the Seller under Section 414(b), (c), (m) or (o)
of the United States Internal Revenue Code of 1986, as amended (the "Code") or
Section 4001 of ERISA. Schedule 8.10(a) lists all the Benefit Plans covering
Business Employees or Former Employees who are, or were, employed in the United
States of America (the "U.S. Benefit Plans"). Each Benefit Plan (i) established,
sponsored or maintained by or contributed to solely by one or more Purchased
Subsidiaries, (ii) established, sponsored or maintained by or contributed to
solely by one or more Purchased Subsidiaries and any other Persons that are not
Seller or any of its Affiliates (other than the Purchased Subsidiaries), or
(iii) in which only Business Employees or Former Employees participate or
participated or are or were a participant thereto (including, without
limitation, all individual agreements) shall be herein referred to as a
"Business Benefit Plan." Each other Benefit Plan in which Business Employees or
Former Employees participate shall herein be referred to as a "Seller Benefit
Plan." As used herein, "Business Employees" shall mean those employees of Seller
or its Affiliates (i) actively employed (including those on short-term
disability or other short-term leave) by a Purchased Subsidiary immediately
prior to the Closing who work wholly or predominantly for the Business or (ii)
not employed by a Purchased Subsidiary but who, immediately prior to the
Closing, work wholly or predominantly for the Business (but excluding, in each
case, any individuals on long-term disability or layoff immediately prior to the
Closing), and "Former Employees" shall mean those individuals who, immediately
prior to the Closing, are not Business Employees and who were formerly employed
by a Purchased Subsidiary (or predecessor) or worked wholly or predominantly for
the Business at any time prior to the Closing.
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(b) Except as set forth in Schedule 8.10(b), all Business Benefit Plans
have been established and maintained in all material respects in accordance with
their respective terms and in compliance in all material respects with the
applicable requirements of law, including, without limitation, ERISA and the
Code, and, to the extent applicable, the notification and other requirements of
COBRA, the Health Insurance Portability and Accountability Act of 1996, the
Newborns' and Mothers' Health Protection Act of 1996, the Mental Health Parity
Act of 1996, and the Women's Health and Cancer Rights Act of 1998.
(c) Except as set forth on Schedule 8.10(c), each Business Benefit Plan
that is intended to qualify under Section 401(a) of the Code is so qualified,
has received a favorable determination letter that it is so qualified and that
its trust is exempt from taxation, and there are no facts which caused or could
reasonably be expected to cause such favorable determination letters to be
revoked or the loss of qualification or exemption. All contributions by Seller
and its Affiliates for or in respect of the members of the Business Benefit
Plans which fall due for payment before the Closing Date will have been paid by
that date. Except as set forth on Schedule 8.10(c) or as may be prohibited by
law, each Business Benefit Plan that provides welfare benefits to any Business
Employee may be amended, modified or terminated after the Closing Date except
for such amendments, modifications or terminations that would not reasonably be
expected to have a Material Adverse Effect on the Business. Except as set forth
on Schedule 8.10(c), no Business Benefit Plan that is an employee pension plan
(as defined under Section 3(2) of ERISA) provides for increased or accelerated
benefits for any group dismissal or facility closures.
(d) Neither Seller nor any ERISA Affiliate maintains or contributes to, has
maintained or contributed to, has been required to contribute to or has any
liability with respect to a "multi-employer plan," as such term is defined in
Section 414(f) of the Code or Sections 3(37) or 4001(a) of ERISA, with respect
to Business Employees or Former Employees.
(e) Except as set forth on Schedule 8.10(e), no material "reportable event"
within the meaning of Section 4043(b) of ERISA has occurred that has not been
waived, and the consummation of the transactions contemplated by this Agreement
cannot reasonably be expected to result in a reportable event, in each case, in
respect of any Business Benefit Plan. No amounts payable or benefits provided
under any Business Benefit Plan will fail to be deductible for federal income
tax purposes by virtue of Section 280G of the Code in connection with, or
related to, the transactions contemplated by this Agreement (including such
transactions in combination with any other event (such as employment
termination, but not a subsequent change in control)). Except for the U.S.
Bargaining Pension Plan and the Pension Plans referred to in Section 12.2(g),
neither the Seller nor any ERISA Affiliate has any unfunded liabilities pursuant
to any Business Benefit Plan that is an employee pension plan under Section 3(2)
of ERISA.
(f) Schedule 8.10(f) lists each Benefit Plan that is not a U.S. Benefit
Plan (a "Foreign Benefit Plan") other than individual employment or other
severance agreements involving annual payments of less than $100,000. Each
Foreign Benefit Plan that is a Business Benefit Plan (a "Foreign Business
Benefit Plan") intended to qualify as a tax-registered or tax-favored plan under
a foreign jurisdiction is the subject of a favorable determination or similar
approval, to the extent available, of the applicable foreign governmental
authorities and nothing has occurred or is reasonably expected to occur that
impaired or could reasonably be expected to
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impair such determination or approval or result in the imposition of a material
penalty or liability. Seller and each Purchased Subsidiary have performed, in
all material respects, all obligations required with respect to each Foreign
Business Benefit Plan.
(g) Except as set forth on Schedule 8.10(g), all payments required in
connection with any Business Benefit Plan (including, without limitation, all
contributions, insurance premiums, or intercompany charges) have in all material
respects been made on a timely basis. Except as set forth on Schedule 8.10(g) or
contemplated under Article XII of this Agreement, the consummation of the
transactions contemplated by this Agreement will not, in and of itself or in
combination with any other event (such as employment termination, but not a
subsequent change in control), give rise to any material liability, including,
without limitation, material liability for severance pay, material unemployment
compensation, material termination pay or withdrawal liability, or accelerate
the time of payment, funding or vesting or materially increase the amount of
compensation or benefits due to any Business Employee, Former Employees or any
director of a Purchased Subsidiary or their beneficiaries solely by reason of
such transactions. Neither the Seller nor any ERISA Affiliate, or any officer or
employee thereof, has made any promises or commitments, whether legally binding
or not, to create any additional material plan, agreement, or arrangement, or to
materially modify or change any existing Benefit Plan as it relates to the
Purchased Subsidiaries, the Business, the Business Employees or the Former
Employees.
(h) With respect to each of the Benefit Plans listed or referred to in
Section 8.10(a) and 8.10(f), the Seller has made reasonably available to
Purchaser, to the extent applicable: (i) each such written Benefit Plan and any
related trust agreement, insurance and other contract (including a policy), if
any, the most recently prepared summary plan description, if any, summary of
material modifications the substance of which is not already incorporated in the
corresponding summary plan description or Benefit Plan document, if any, and
written communications distributed to plan participants that would reasonably be
expected to materially modify the terms of any such Benefit Plan, whether
through information actually conveyed in the communication or a failure to
convey information; (ii) the most recent annual report on Form 5500 if such plan
is a U.S. Benefit Plan (or equivalent filing with respect to Foreign Business
Benefit Plans), with accompanying schedules and attachments, filed with respect
to each such Benefit Plan, whether maintained in the U.S. or a Foreign Business
Benefit Plan, required to make such a filing; (iii) the most recent actuarial
valuation, if any, for each Business Benefit Plan; and (iv) the most recent
favorable determination letters issued for each Business Benefit Plan and
related trust which is intended to be qualified under Section 401(a) of the Code
or any other tax-related statute (and, if an application for such determination
is pending, a copy of the application for such determination).
(i) Except as set forth in Schedule 8.10(i), (i) none of the Benefit Plans
promises or provides medical or other Welfare Benefits (as defined in Section
12.2(f)) below to any Business Employee or Former Employee (or any of their
beneficiaries) after their termination of employment other than as required by
Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA
(hereinafter, "COBRA"), or any similar state or non-U.S. laws; (ii) neither the
Seller, any Affiliates, any other party in interest or disqualified person (as
defined in Section 3(14) of ERISA and Section 4975 of the Code), has engaged in
a transaction with respect to any Benefit Plan that would reasonably be expected
to subject the Purchaser or any
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subsidiary, directly or indirectly, to a material tax, penalty or other
liability for prohibited transactions under ERISA or Section 4975 of the Code;
(iii) with respect to the Business Benefit Plans, neither the Seller nor any
Affiliates, has materially breached any of the responsibilities or obligations
imposed upon Seller or any of its Affiliates under Title I of ERISA; and (iv)
other than routine claims for benefits made in the ordinary course of the
operation of the Benefit Plans as of the date hereof, there are no pending, or
to the Knowledge of Seller, threatened, claims, investigations or causes of
action with respect to any Business Benefit Plan, whether made by a participant
or beneficiary of such a plan, a governmental agency or otherwise.
(j) Except as set forth on Schedule 8.10(j), as of the date hereof, there
are no material complaints, charges or claims against the Seller or any of its
subsidiaries pending or, to the Knowledge of Seller, threatened, to be brought
by or filed with any governmental authority based on, arising out of, in
connection with or otherwise relating to the classification of any individual by
the Seller or any Purchased Subsidiary as an independent contractor or "leased
employee" (within the meaning of Section 414(n) of the Code) rather than as an
employee, and to the Knowledge of Seller no conditions exist under which any
Purchased Subsidiary or the Business is reasonably likely to incur any such
material liability.
(k) The warranties set out in Clause 2 of Schedule 12.4(a) (United Kingdom
Pensions) shall have effect as if they were repeated in this Section 8.10(k).
8.11. INTELLECTUAL PROPERTY:
(a) Schedule 8.11(a) sets forth a true, complete and correct list of all
patents, registered designs, trade names, trademarks, service marks, trade
dress, copyrights, domain names and mask works which are used in the conduct of
the Business as currently conducted and which are issued or registered with the
United States Patent and Trademark Office, the United States Copyright Office
(or any other similar national intellectual property authority), or in respect
of which applications to register have been made and are pending, in each case
in the name of any of the Purchased Subsidiaries or any other Affiliate of the
Seller (excluding, for the avoidance of doubt, the Excluded Assets).
(b) Except as set forth in Schedule 8.11(b), Seller, the Seller Group and
the Purchased Subsidiaries are the unencumbered legal and beneficial owners of
the Seller Intellectual Property (as defined in Section 8.11(c) below) capable
of transferring of the same, and, with respect to any Seller Intellectual
Property which has been issued or registered, are the registered proprietors of
the Seller Intellectual Property, and, except for any Seller Intellectual
Property which are common law unregistered marks, copyright, design rights,
trade secrets and know-how, each has taken all steps reasonably necessary to
ensure that the Seller Intellectual Property is valid and enforceable in all
jurisdictions necessary for and material to the conduct of the Business.
(c) Except as set forth in Schedule 8.11(c)(i), the intellectual property
listed in Schedule 8.11(a) and all material common law unregistered marks,
copyright, design rights and rights in and to trade secrets and know-how which
are assets of the Purchased Subsidiaries or Target Assets (the "Seller
Intellectual Property") and all licenses, agreements, sublicenses and
permissions by which Seller, any Purchased Subsidiary or any Affiliate of Seller
of which the
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Business Divisions form part is granted the right to use any intellectual
property of third parties which is used by the Business as currently conducted
are all the intellectual property rights necessary to the conduct of the
Business as presently conducted and all such licenses, agreements, sublicenses
and permissions which are material to the conduct of the Business as currently
conducted are listed on Schedule 8.11(c)(ii).
(d) Except as would not have a Material Adverse Effect on the Business as
currently conducted or as set forth in Schedule 8.11(d), the products sold by
the Purchased Subsidiaries, or sold in the Business as currently conducted by
the Seller Group or Seller do not infringe, misappropriate or misuse any
intellectual property rights of any other person, and, as of the date hereof,
there is no pending or, to the Seller's Knowledge, threatened Claim against
Seller, and/or any other member of the Seller Group (in relation to the Business
as currently conducted) and/or any Purchased Subsidiary for infringement,
misappropriation or misuse of the intellectual property of any other person and,
to Seller's Knowledge, there is no action or failure to inform, notify or act
which would provide the valid basis for any third party to contest the validity
of any Seller Intellectual Property or the Seller's, or any Purchased
Subsidiary's, or any other Seller Group member's right to use the Seller
Intellectual Property.
(e) Except as set forth in Schedule 8.11(e), neither Seller nor any
Purchased Subsidiary, nor any other Seller Group Member, has asserted within the
two years preceding the date hereof, any formal claim against any other person
that such person had violated, infringed, misappropriated or misused, in any
material respect, any Seller Intellectual Property, nor, to the Knowledge of
Seller, is there any basis for such an assertion.
(f) Except as set forth in Schedule 8.11(f), the Affiliates of Seller of
which the Business Divisions form part and the Purchased Subsidiaries have in
force support contracts which cover all significant items of hardware and
software included in the computer equipment, software, ancillary equipment,
communications equipment, microprocessors, firmware, operating software, routers
and servers, in each case used by such Affiliates in relation to the Business as
currently conducted and/or the Purchased Subsidiaries and which are material to
the conduct of the Business as currently conducted (the "Computer Systems").
(g) Except as set forth in Schedule 8.11(g), the Business Divisions and the
Purchased Subsidiaries have taken commercially reasonable and prudent
precautions to preserve the availability, confidentiality, security and
integrity of data held or transmitted by the Computer Systems (including without
limitation) the use of virus checking software, password protection procedures
and the taking and storing of back up copies of data on site at least once every
24 hours.
(h) Except as set forth in Schedule 8.11(h) and except as would not have a
Material Adverse Effect, in the one year preceding the date of this Agreement,
neither the performance nor the functionality of the Computer Systems has been
affected by any date recognition problem relating to the processing of dates
before, on and after January 1, 2000.
8.12. ABSENCE OF CERTAIN CHANGES OR EVENTS: Except as set forth in Schedule 8.12
and as permitted under Section 7.3, since December 31, 2001, the Business has
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been conducted only in the ordinary course and consistent with past practice,
and since such date neither Seller, with respect to the Business, nor any
Purchased Subsidiary has:
(i) except as otherwise provided in Section 8.12(xi), taken any action
that would not be permitted by Section 7.3(c) had such action been taken
during the period from the date hereof to the Closing Date;
(ii) suffered any Material Adverse Effect;
(iii) suffered any material damage, destruction or casualty loss
(whether or not covered by insurance);
(iv) made any change in its accounting methods, principles or
practices except as required by applicable law or U.S. GAAP or U.K. GAAP;
(v) written down the value of any inventory other than in the ordinary
course of business consistent with past practices;
(vi) written off as uncollectable any notes or accounts receivable in
excess of $1,000,000;
(vii) disposed of, abandoned or permitted to lapse any rights to the
use of any intellectual property which is or was used in the conduct of the
Business, except where Seller, in its reasonable business judgment, has
determined that such intellectual property is no longer necessary to the
conduct of the Business;
(viii) paid, discharged or satisfied any liabilities or obligations
(whether accrued, absolute, contingent or otherwise) in excess of
$1,000,000, other than the payment, discharge or satisfaction, in the
ordinary course of business, of liabilities or obligations incurred in the
ordinary course of business;
(ix) except in the ordinary course of business, subjected any material
assets (whether real, personal or mixed, tangible or intangible) to any
Encumbrance, except for Permitted Liens;
(x) cancelled or waived any claims or rights of value, or sold,
transferred, distributed or otherwise disposed of any material assets,
except for sales of finished goods inventory or other assets in the
ordinary course of business, or disposed of any assets for any amount to
Affiliates of Seller;
(xi) incurred any capital expenditure or commitment for additions to
property, plant or equipment which exceeds $3,000,000 in the aggregate and
which, if purchased, would be reflected in the property, plant or equipment
accounts; or
(xii) other than in the ordinary course of business, increased the
base compensation of or made any other payment to, any director, officer or
employee of the Business making over $100,000 per year, whether now or
hereafter payable or granted, or
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entered into or varied the terms of any employment or incentive agreement
with any such person.
8.13. ENVIRONMENTAL MATTERS:
(a) Except as disclosed on Schedule 8.13, the Business, the members of the
Seller Group with respect to the Business, the Target Assets and the Purchased
Subsidiaries are in compliance with Environmental Laws, except for such
noncompliance as would not have a Material Adverse Effect on the Business.
"Environmental Laws" shall mean all federal, state, provincial and local and
foreign statutes, regulations, ordinances, rules, codes, orders, or decrees and
the common law concerning pollution or protection of human health, safety or the
environment, including, without limitation, all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any Hazardous Substances (as defined
below) as such requirements are enacted and in effect as of the Closing Date;
provided, however, that for purposes of Sections 16.2(a)(ii) and 16.6,
Environmental Laws shall include the legislation set forth on Schedule 8.13(a),
in each case to the extent such legislation is (i) enacted into law and becomes
effective in a form materially similar to the form currently proposed on or
before the 18 month anniversary of the Closing; and (ii) only to the extent such
new laws relate to contamination resulting from any release of any Hazardous
Substances to the soil or groundwater at the Real Property within the European
Union.
(b) Except as set forth on Schedule 8.13 and except as would not have a
Material Adverse Effect on the Business, none of Seller, any member of the
Seller Group, or the Purchased Subsidiaries has received any written notice,
report or other written information regarding any actual or alleged violation of
Environmental Laws, or any Environmental Liabilities, including, without
limitation, any investigatory, remedial or corrective obligations, in each case
relating to the Business, the Target Assets or the Purchased Subsidiaries. For
purposes of this Agreement, the term "Environmental Liabilities" shall mean any
suits, claims, judgments, damages (including punitive damages), losses,
penalties, fines, liabilities, encumbrances, liens, violations, costs, and
expenses (including, without limitation, attorneys' and consultants' fees)
relating to or in connection with (i) the existence (or alleged existence) of
materials identified as "hazardous," "toxic," "pollutants," "contaminants,"
"waste" and words of similar meaning under the Environmental Laws ("Hazardous
Substances") in, on, under, at, or emanating from the Real Property, the Target
Assets or the Purchased Subsidiaries, or any real property formerly owned,
leased, operated, or managed by any member of the Seller Group with respect to
the Business or any Purchased Subsidiary; (ii) the off-site transportation,
treatment, storage, or disposal (or alleged offsite transportation, treatment,
storage, or disposal) of Hazardous Substances generated by any member of the
Seller Group or their respective predecessors, in each case, with respect to the
Business, the Target Assets or the Purchased Subsidiaries; or (iii) the
violation of or non-compliance with (or alleged violation of or non-compliance
with) any Environmental Laws by the Business, the Target Assets or the Purchased
Subsidiaries, or which otherwise arise under Environmental Laws as a result (or
allegedly as a result) of the acts or omissions of any member of the Seller
Group with respect to the Business or any Purchased Subsidiary.
(c) Except as disclosed on Schedule 8.13, and except as would not have a
Material Adverse Effect on the Business, (i) the members of the Seller Group
with respect to the Business,
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the Target Assets and the Purchased Subsidiaries have all the permits,
concessions, grants, franchises, licenses and other governmental authorizations
and approvals necessary for the conduct of the Business and for the operation of
the Target Assets and the Purchased Subsidiaries which are required under the
Environmental Laws ("Environmental Permits"); (ii) the Target Assets and the
Purchased Subsidiaries are in compliance with the terms and conditions of all
such Environmental Permits; and (iii) no reason exists why the Purchased
Subsidiaries would not be capable of continued operation of the Business, the
Target Assets and the Purchased Subsidiaries in compliance with the
Environmental Permits and Environmental Laws.
(d) Except as disclosed in Schedule 8.13(d) and except as would not have a
Material Adverse Effect on the Business, none of the Purchased Subsidiaries or
the members of the Seller Group with respect to the Business have been
identified as a potentially responsible party or liable party at any United
States National Priority List (Superfund) site or the state or, to the knowledge
of Seller Group, foreign analog thereto.
(e) Notwithstanding any other provision of this Agreement, this Section
8.13 contains the exclusive representations of the Seller Group and the
Purchased Subsidiaries concerning any matters arising under Environmental Laws.
8.14. ACCOUNTS RECEIVABLE; INVENTORY: Except as provided on Schedule 8.14(a),
the accounts receivable reflected on the December 31, 2001 balance sheet
delivered pursuant to Section 8.4 hereof (the "Balance Sheet") represent sales
actually made in the ordinary course of business for goods or services delivered
or rendered in bona fide "arm's-length" transactions. Except as reserved for on
the Balance Sheet, the Purchased Inventories do not include material amounts of
items that management believes to be obsolete, damaged, below standard quality,
or non-merchantable in the ordinary course of business of the Business, in each
case net of reserves provided therefore. As of February 23, 2002, the accounts
receivable aging schedules and supporting detail previously provided to
Purchaser and attached hereto in Schedule 8.14(b) were true and correct in all
material respects.
8.15. TAX MATTERS:
(a) Except as set forth on Schedule 8.15(a) or except as would not have a
Material Adverse Effect on the Business, (i) all Taxes (as hereinafter defined)
required to be paid by, on behalf of or with respect to the Seller Group, the
Purchased Subsidiaries, any Consolidated Group of which any of the Purchased
Subsidiaries is or was a member or the Target Assets on or prior to the Closing
Date have been, or will be, timely paid (taking into account any granted
extensions of the due date for payment of such Taxes), or adequate accruals have
been, or will be, made for any unpaid Taxes of or with respect to the Purchased
Subsidiaries or the Target Assets attributable to any period prior to the
Closing Date, (ii) all Tax Returns (as hereinafter defined) required to be filed
by, on behalf of or with respect to the Seller Group, the Purchased
Subsidiaries, any Consolidated Group of which any of the Purchased Subsidiaries
is or was a member or the Target Assets prior to the Closing Date have been, or
will be, timely filed (taking into account any granted extensions of the due
date for the filing of such Tax Returns) with the appropriate taxing authority;
(iii) such Tax Returns correctly reflected in all respects the facts regarding
the income, business, assets, operations, activities and status of the Seller
Group, the
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Purchased Subsidiaries and the Target Assets and any other information required
to be shown therein; (iv) no action or proceeding by any governmental authority
for the assessment or collection of Taxes of any of the Purchased Subsidiaries
or with respect to the Target Assets is pending or has been threatened in
writing; (v) no written claim or deficiency against any of the Purchased
Subsidiaries or with respect to the Target Assets for the assessment or
collection of any Taxes has been asserted or proposed which written claim or
deficiency has not been settled with all amounts determined to have been due and
payable having been timely paid (taking into account any granted extensions of
the due date for payment of any such Taxes); (vi) no audit of any Tax Return of
any of the Purchased Subsidiaries or with respect to the Target Assets is in
progress; (vii) no written claim has ever been made by an authority in a
jurisdiction where any Purchased Subsidiary does not file Tax Returns that such
Purchased Subsidiary is or may be subject to taxation by that jurisdiction;
(viii) there are no written agreements, waivers or other arrangements in effect
providing for an extension of time with respect to the filing of any Tax Returns
of any of the Purchased Subsidiaries, the payment of any Tax of any of the
Purchased Subsidiaries, or for the assessment or collection of any Tax of or
deficiency against or relating to any of the Purchased Subsidiaries; (ix) as of
the Closing, there will be no outstanding powers of attorney enabling any party
to represent any of the Purchased Subsidiaries with respect to matters involving
Taxes; (x) the Purchased Subsidiaries have timely withheld and remitted to the
applicable governmental authority all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party in compliance with all
withholding and similar provisions of any and all applicable U.S. federal, state
and local and non-U.S. Tax Laws; (xi) no Purchased Subsidiary is a party to any
agreement, arrangement or practice for the sharing of Taxes or is obligated to
indemnify any other person for Taxes pursuant to any agreement, arrangement or
practice, which agreement, arrangement or practice will remain in effect after
the Closing; (xii) there are no liens for Taxes on any Target Asset or any asset
of the Purchased Subsidiaries other than Permitted Liens; (xiii) none of the
assets of the Purchased Subsidiaries secures any debt the interest on which is
tax exempt under Section 103(a) of the Code; (xiv) none of the Purchased
Subsidiaries has been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code; (xv) no consent under Section
341(f) of the Code has been filed with respect to any of the Purchased
Subsidiaries; (xvi) no Purchased Subsidiary has participated in an international
boycott as defined in Section 999 of the Code; (xvii) no Purchased Subsidiary
will be required to include any item of income in, or exclude any item of
deduction from, taxable income for any Post-Closing Tax Period as a result of
any (A) change in accounting method for any Pre-Closing Tax Period under Section
481 of the Code (or any analogous or comparable provision of U.S. state or local
or non-U.S. Tax Law), (B) a written agreement with a Tax authority with regard
to the Tax liability of a Purchased Subsidiary for any Pre-Closing Tax Period,
(C) deferred intercompany gain described in U.S. Treasury Regulations under
Section 1502 of the Code (or any corresponding or similar provision of state,
local or non-U.S. Income Tax Law) arising from any transaction that occurred
prior to the Closing Date or prior to the Closing on the Closing Date, (D)
installment sale or open transaction disposition made prior to the Closing Date
or prior to the Closing on the Closing Date, or (E) prepaid amount received on
or prior to the Closing Date; (xviii) none of the property of the Purchased
Subsidiaries is "tax-exempt use property" within the meaning of Section 168(h)
of the Code; (xix) no Purchased Subsidiary is a party to any joint venture,
partnership or other written arrangement or contract which could be treated
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as a partnership for U.S. federal income tax purposes for any period for which
the statute of limitations for any Tax on the income therefrom has not expired;
(xx) no U.S. Purchased Subsidiary has an excess loss account (as defined in U.S.
Treasury Regulations Section 1.1502-19) with respect to the stock of any other
U.S. Purchased Subsidiary that will not be included in income on or prior to the
Closing Date; (xxi) there are no outstanding rulings of, or requests for rulings
with, any taxing authority that are, or if issued would be, binding on any
Purchased Subsidiary in any Post-Closing Tax Period; (xxii) neither Seller nor
any Purchased Subsidiary has constituted either a "distributing corporation" or
a "controlled corporation" in a distribution of stock qualifying or intended to
qualify for tax-free treatment under Section 355 of the Code in the two years
prior to the date of this Agreement; and (xxiii) from and after October 28,
1999, each of the U.S. Purchased Subsidiaries that is or was classified as a
corporation for United States federal Income Tax purposes, other than PMV Inc.,
is, or was during such time it was so classified, a member of the Consolidated
Group that includes Invensys, Inc. and such Consolidated Group will actually
file a consolidated United States federal Income Tax Return for its taxable year
that includes the Closing Date.
(b) With respect to each Purchased Subsidiary organized under the laws of
the United Kingdom (a "U.K. Subsidiary"), except as set forth on Schedule
8.15(b)(2) or except as would not have a Material Adverse Effect on the
Business, Seller represents and warrants to Purchaser as to the statements set
forth on Schedule 8.15(b)(1) in addition to the statements set forth in Section
8.15(a).
(c) Seller will have delivered or made available to Purchaser by the
Closing (i) complete copies of all Tax Returns with respect to the Purchased
Subsidiaries, other than Tax Returns of any affiliated, aggregate, consolidated,
combined, unitary or similar group which includes Seller or any Affiliate of
Seller (other than any of the Purchased Subsidiaries), and all examination
reports and statements of deficiencies and other Tax-related documents and
correspondence relating to such Tax Returns, filed or received by the Purchased
Subsidiaries since December 31, 1998, and (ii) complete copies of the portions
of Tax Returns of any affiliated, aggregate, consolidated, combined, unitary or
similar group which includes Seller or any Affiliate of Seller (other than any
of the Purchased Subsidiaries) filed since December 31, 1998 that relate solely
to the Purchased Subsidiaries.
(d) Seller Group makes no representation or warranty regarding the amount
or existence of any losses, credits, Reliefs, allowances or other Tax attributes
of the Purchased Subsidiaries.
8.16. LABOR MATTERS: Except as disclosed on Schedule 8.16, (i) none of Seller,
any member of the Seller Group or any Purchased Subsidiary is a party to or
subject to any Collective Bargaining Agreement; (ii) there are no material
agreements with labor unions, work councils or associations representing
Business Employees, and no unions or other collective bargaining units have been
certified or recognized by Seller with respect to the Business Employees as
representing any of the Business Employees and, to the Knowledge of Seller,
there are no existing union organizing efforts or representation questions with
respect to any of the Business Employees or agreements currently being
negotiated, and (iii) there is no material labor strike or material dispute,
grievance, arbitration proceeding, slowdown or stoppage, or material charge of
unfair labor practice actually pending or, to the Knowledge of Seller,
threatened
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against the Purchased Subsidiaries or Sellers of the Target Assets or affecting
the Business Employees, nor have there been any of the foregoing within the past
three years, and (iv) the Purchased Subsidiaries and the Seller Group are in
compliance in all material respects with respect to the Business with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any
material unfair labor practice. Schedule 8.16 contains a list of each Business
Employee and consultant to the Business whose current annual salary or fee
(including bonus) is the equivalent of US $150,000 or more, together with the
current job title or relationship to the Business. As soon as reasonably
practicable after the date hereof, Seller shall provide a list of all Business
Employees , showing their base salaries and incentive opportunity and such other
demographic information as Purchaser shall reasonably request.
8.17. DISCLOSURE:
(a) The representations and warranties contained in this Article VIII, and
the statement contained in the Schedules provided pursuant hereto, inclusive, do
not intentionally and fraudulently contain any untrue statement of a material
fact or intentionally and fraudulently omit to state any material fact necessary
in order to make the statements contained therein not misleading. While Seller
has attempted in good faith to cross-reference between Schedules, the parties
agree that any item disclosed in any Schedule shall be deemed disclosed in any
other Schedule to which the applicability of such disclosure is reasonably
evident. Except where information has been specifically identified as being
redacted, all copies of documents provided to Purchaser prior to the date hereof
are, in all material respects, true, complete and correct copies of such
documents.
(b) Purchaser acknowledges and agrees that Seller has not made and shall
not be deemed to have made any representations or warranties concerning the
Business or the Target Assets or the Purchased Subsidiaries except as
specifically set forth in this Article VIII. Except as set forth in this Article
VIII, Seller has not made, and hereby expressly disclaims, any other further
representation or warranty, either express or implied, concerning the subject
matter of this Agreement. The warranties given in this Article VIII are in lieu
of all other warranties the Seller might have given Purchaser, including implied
warranties of merchantability and implied warranties of fitness for intended
use. All other warranties Seller or anyone purporting to represent Seller gave
or might have given, or which might be provided or implied by law or commercial
practice, are hereby excluded. Seller makes no further representation or
warranty concerning material facts that might have come to their attention had
they conducted a broader or more thorough investigation of the Business and the
Target Assets and the Purchased Subsidiaries.
(c) Notwithstanding anything to the contrary contained in this Agreement,
with the exception of the representations and warranties contained in Section
8.3 and the provisions of Section 8.2 referring to the shares of each Purchased
Subsidiary, the representations and warranties made in this Article VIII with
respect to the entities listed on Schedule 8.17(c) are made to the Knowledge of
Seller.
8.18. INSURANCE: Schedule 8.18 attached hereto and made a part hereof accurately
lists and describes the policies of insurance covering the assets and operations
of the Business, the
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Purchased Subsidiaries and the Target Assets as of the date hereof. All such
policies are (and any replacement policies will be) valid and subsisting and in
full force and effect in accordance with their terms, and all premiums due and
payable thereon have been paid, and no notice of cancellation or termination has
been received with respect to any such policies which has not been replaced on
substantially similar terms prior to the date of such cancellation. To the
Knowledge of Seller, the activities and operations of the Purchased Subsidiaries
and the Target Assets have been conducted in a manner so as to conform in all
material respects to all applicable provisions of such insurance policies.
Seller believes that all such policies are (and any replacement policies will
be) with reputable insurance carriers and in character and amount and with such
deductibles and against such risks and losses as are reasonable for the Business
and the assets of the Purchased Subsidiaries, and that are at least equivalent
to that carried by persons engaged in similar businesses and subject to the same
or similar perils or hazards. Except as set forth in Schedule 8.18, as of the
date hereof, there are no material claims by Seller with respect to the
Business, the Purchased Subsidiaries or any members of the Seller Group with
respect to the Business, pending under any insurance policy or bond as to which
coverage has been questioned, denied or disputed by the underwriters of any such
policy or bond or in respect of which such underwriters have reserved their
rights.
8.19. PRODUCT LIABILITY AND RECALLS:
(a) Except as set forth in Schedule 8.19(a), as of the date hereof, there
is no material Proceeding by or before any court or governmental body pending
or, to the Knowledge of Seller threatened, and neither Seller nor any of its
Affiliates has received written notice of any pending investigation by any
Governmental Authority, in each case against Seller or any of its Affiliates
involving the Business relating to any product alleged to have been designed,
manufactured or sold by the Business or any Purchased Subsidiary and alleged to
have been defective or improperly designed or manufactured.
(b) Except as set forth in Schedule 8.19(b), as of the date hereof, there
is no pending or threatened material recall or investigation of which Seller or
any of its Affiliates has been notified in writing by any Governmental Authority
for any product sold by the Purchased Subsidiaries or any other Affiliate or
member of Seller in connection with the Business.
8.20. POWERS OF ATTORNEY: Except as set forth in Schedule 8.20 attached hereto
and made a part hereof and except those powers of attorney that will terminate
on or prior to the Closing, there are no powers of attorney executed on behalf
of the Purchased Subsidiaries or any Affiliate of Seller with respect to the
Business.
8.21. BOOKS AND RECORDS: The corporate minute books and stock certificates and
transfer back records of each of the Purchased Subsidiaries (which have been
made available for inspection by Purchaser prior to the date hereof) are
complete and correct in all material respects.
8.22. BANK ACCOUNTS; SAFE DEPOSIT BOXES: Schedule 8.22 attached hereto and made
a part hereof sets forth a complete and correct list of each account with any
bank, trust company, securities broker or other financial institution with which
the Purchased Subsidiaries have any account and all safe deposit boxes
maintained by each of them, including the identifying numbers or symbols
thereof.
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8.23. GUARANTEES: Except as set forth in Schedule 8.23 attached hereto and made
a part hereof, none of the Purchased Subsidiaries are guarantors for any
liability or obligations (including indebtedness) of any person (other than any
other Purchased Subsidiary).
8.24. RESTRICTIONS ON BUSINESS ACTIVITIES: Except for this Agreement or as set
forth on Schedule 8.24, neither the Purchased Subsidiaries nor any other
affiliates of Seller is a party to any contract containing non-competition
provisions that limit or restrict the ability of the Purchased Subsidiaries to
do business in any line of business or in any geographical area, nor is any
Purchased Subsidiary or other Affiliates of Seller subject, as of the date
hereof, to any binding judgment, injunction, order or decree which limits or
restricts the ability of the Purchased Subsidiaries to do business in any line
of business or in any geographical area.
8.25. PRODUCT WARRANTY: Schedule 8.25(a) hereto includes copies of the standard
terms and conditions of sale of products of the Business (containing applicable
guaranty, warranty and indemnity provisions). Except as set forth on Schedule
8.25(b), between July 1, 1999 and March 1, 2002, no action, suit, claim or
proceeding involving amounts in excess of (pound)100,000 alleging breach of
warranty in respect of products manufactured by the Business was instituted by
or before any court.
8.26. TRANSACTIONS WITH AFFILIATES: Except as set forth in Schedule 8.26, none
of the Material Contracts set forth in Schedule 8.7 between any Purchased
Subsidiary, on the one hand, and Seller or any of its Affiliates (other than
Purchased Subsidiaries), officers, directors or employees, on the other hand,
will continue to be in effect subsequent to the Closing. Except as set forth in
Schedule 8.26, after the Closing none of the Affiliates of Seller or, to the
Knowledge of Seller, any of their officers, directors or employees will have any
interest in any property (real or personal, tangible or intangible) or Material
Contract of any Purchased Subsidiary or used in or pertaining to the Business.
8.27. CORPORATE NAME: Except as set forth in Schedule 8.27, to the Knowledge of
Seller, the Purchased Subsidiaries (i) have the exclusive right to use their
respective names as the name of a corporation in any jurisdiction in which such
Purchased Subsidiary does business and (ii) have not received any notice of
conflict during the past three years with respect to the rights of others
regarding the corporate names of the Company and the Subsidiaries. Except as set
forth in Schedule 8.27, to the Knowledge of Seller, no person is presently
authorized by Seller, any member of the Seller Group or any Purchased Subsidiary
to use the name of a Purchased Subsidiary. Seller has previously made available
to Purchaser copies of any documents in the possession of Seller granting any
authorizations of the type referred to in the previous sentence. This Section
8.27 does not relate to intellectual property matters and nothing in this
Section 8.27 shall be construed as referring or relating to the intellectual
property rights or authorizations, including, without limitation, rights in
trademarks and service marks.
8.28. REQUIRED NOTICES: Each member of Seller Group has informed, or has caused
the appropriate Purchased Subsidiary, as required, to inform and consult their
respective works councils or other employee representative bodies, and has
provided them with all necessary documents and information regarding the
transactions contemplated by this Agreement, to the extent required by European
Union and applicable European Union Member State law. Each such member of Seller
Group and each such Purchased Subsidiary shall have received the prior
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consent of Purchaser in relation to all information regarding Purchaser or any
of its Affiliates that is provided to any such works council or other employee
representative body.
8.29. CERTAIN BELGIAN RECORDS: Schedule 8.29 contains a copy of the annual
financial statements of Invensys Flow Control Benelux NV ("IFCB") for the
financial years ending on December 31, 1999 and March 31, 2001, respectively
(the "IFCB Financial Statements"). The annual financial statements of IFCB have
been prepared in accordance with Belgian law and Belgian generally accepted
accounting principles. They fairly and truly reflect (image fidele/getrouw
beeld) the assets and liabilities, financial condition and results of operations
of IFCB on the dates indicated. The annual financial statements of IFCB have
been certified without any reservations by IFCB's auditors. A copy of these
letters is attached to the accounts to which they relate. The IFCB Financial
Statements have been filed with the National Bank of Belgium on the dates
mentioned thereon. The valuation rules of IFCB have not been amended in the last
three financial years. All books of accounts, ledgers, and all other accounting
or financial records and documents of IFCB that must be maintained by law or
that are maintained according to sound business practices, are up-to-date, have
been properly maintained and contain true and complete records of all matters
required to be entered therein. All books and records referred to in this clause
are kept at the registered office of IFCB.
8.30. BROKERS: Except for J.P. Morgan Securities Inc., whose fees and expenses
are the sole responsibility of Seller, no broker, finder, investment banker or
other person is entitled to any brokerage, financial advisor's, finder's or
other similar fee or commission payable by such person in connection with this
Agreement based upon arrangements made by or on behalf of Seller.
ARTICLE IX.
Representations and Warranties of Purchaser
Purchaser hereby represents and warrants to Seller as follows:
9.1. ORGANIZATION AND AUTHORITY: Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of New York and each
Purchaser Designee is an entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of Purchaser
and each Purchaser Designee has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted, to execute and deliver this Agreement and the Related Documents and
to perform the obligations to be performed by it hereunder and thereunder, and
to consummate the transactions contemplated hereby and thereby.
9.2. FUNDING: Purchaser has received written commitments (the "Commitment
Letters") from third-party lenders to obtain, subject to the terms and
conditions contained therein, all of the funds necessary to consummate the
transactions contemplated by this Agreement. True and complete copies of the
Commitment Letters are attached hereto as Exhibit C.
9.3. CORPORATE ACTION; NO CONFLICT: The execution, delivery and performance by
Purchaser of this Agreement and the Related Documents to be delivered by
Purchaser and the consummation of the transactions contemplated hereby and
thereby have been duly and validly
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authorized by all necessary corporate action on the part of Purchaser and will
not require any approval on the part of Purchaser's stockholders under the
Purchaser's Certificate of Incorporation or by-laws. This Agreement has been
duly and validly executed and delivered by Purchaser and is, and each of the
Related Documents when executed and delivered by Purchaser or any Purchaser
Designee in accordance with its terms will be, the valid and binding obligation
of Purchaser or such Purchaser Designee, enforceable in accordance with the
terms thereof, except as limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors rights generally. Neither the execution,
delivery or performance by Purchaser of this Agreement or any Related Document,
nor the consummation by Purchaser or any Purchaser Designee of the transactions
contemplated hereby or thereby, nor compliance by Purchaser or any Purchaser
Designee with any provision hereof or thereof will (i) conflict with or result
in a breach of any provision of the charter or by-laws of Purchaser or any
Purchaser Designee; (ii) violate any provision of law, statute, rule or
regulation or any order, writ, injunction, permit, judgment or decree of any
court or other governmental or regulatory authority applicable to Purchaser or
any Purchaser Designee (except where such violations would not, or could not,
reasonably be expected to prevent or materially impede or delay the completion
of the transactions contemplated by this Agreement (a "Purchaser Material
Adverse Effect")); (iii) except as would not, or could not, reasonably be
expected to have a Purchaser Material Adverse Effect, result in a breach of, or
constitute a default under (with or without notice, lapse of time or both) or
result in the invalidity of, or accelerate the performance required by or cause
or give rise to any right of acceleration or termination of any right or
obligation pursuant to, or require the consent of the other party to, any
material agreement, material instrument, order, judgment or decree to which
Purchaser or any Purchaser Designee is subject; (iv) result in the creation of,
or with the passage of time result in the creation of, any Encumbrance upon any
assets or properties of Purchaser or any Purchaser Designee which would or
could, reasonably be expected to have a Purchaser Material Adverse Effect; or
(v) require Purchaser or any Purchaser Designee to obtain any consent of or make
any filing with any governmental entity, except as may be required under the HSR
Act or to obtain any Competition Approvals, except where the failure to obtain
any such consent or make any such filing would prevent, materially delay or
impair the ability of Purchaser or any Purchaser Designee to consummate the
transactions contemplated hereby.
9.4. BROKERS: Except for Morgan Stanley & Co. Incorporated, whose fees and
expenses are the sole responsibility of Purchaser, no broker, finder, investment
banker or other person is entitled to any brokerage, financial advisor's,
finder's or other similar fee or commission payable by such person in connection
with this Agreement based upon arrangements made by or on behalf of Purchaser.
ARTICLE X.
Conditions to Obligations of Purchaser
The obligations of Purchaser under this Agreement are, at its option,
subject to the fulfillment, on or before the Closing Date, of each of the
following conditions precedent:
10.1. PERFORMANCE OF COVENANTS: Seller shall have performed and complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or before the Closing Date.
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10.2. REPRESENTATIONS AND WARRANTIES: The representations and warranties of
Seller contained in this Agreement shall be true and correct in all material
respects as of the Closing Date as though such representations and warranties
had been made as of the Closing Date, except (a) for each of the representations
and warranties of Seller contained herein that are limited by materiality, which
shall be true and correct in all respects as of the Closing Date; (b) to the
extent of changes or developments contemplated by the terms of this Agreement;
and (c) for representations and warranties that speak as of a specific date or
time (which need only be true and correct as of such date or time); and
Purchaser shall have received at the Closing a certificate of an officer of
Seller, dated as of the Closing Date, to such effect.
10.3. GOVERNMENT FILINGS: Any applicable waiting period (including any
extensions thereof) required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act") shall have expired or been terminated,
and all notices, consents or approvals required to be made or obtained prior to
the Closing under merger control or competition laws, rules or regulations of
any other jurisdiction applicable to the transactions contemplated by this
Agreement (collectively the "Competition Approvals") shall have been made or
obtained. All other required governmental and third-party consents and approvals
and all Permits necessary for Purchaser to operate the Business in all material
respects as conducted by Seller on the date hereof, shall have been obtained
without the imposition of terms that would have a Material Adverse Effect on
Purchaser or the Business.
10.4. NO PROCEEDINGS: There shall not be pending any claim, objection or
threatened objection, suit, action or other proceeding brought by a governmental
agency before any court or governmental agency, seeking to delay, prohibit or
restrain the transactions contemplated by this Agreement or seeking material
damages in connection therewith.
10.5. AUTHORIZATION: All action necessary to authorize the execution, delivery
and performance by Seller of this Agreement and each of the Related Documents
and the consummation of the transactions contemplated hereby and thereby shall
have been duly and validly taken by Seller, and Seller shall have full power and
right to consummate the transactions contemplated hereby and thereby.
10.6. SECRETARY'S CERTIFICATE: Seller shall have delivered to Purchaser a
certificate of the Secretary or Assistant Secretary of Seller as to the
corporate resolutions authorizing the execution and delivery of this Agreement
and the transactions contemplated thereby and the incumbency and authority of
the person(s) signing this Agreement and the Related Documents for Seller.
10.7. RESIGNATION: Purchaser shall have received the written evidence of the
resignation or removal of those persons referred to in Section 5.1(e) from all
positions with any of the Purchased Subsidiaries.
10.8. NON-COMPETITION AGREEMENT: Seller shall have entered into the
Non-Competition Agreement referred to in Section 5.1(f).
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10.9. MARKET CONDITIONS: There shall not have occurred after the date of this
Agreement, a material disruption of or a material adverse change in financial,
banking or capital market conditions.
10.10. MINIMUM EBITDA: Purchaser shall be reasonably satisfied that the amount
of EBITDA set forth on the Statement of EBITDA (calculated as set forth in
Section 4.2) will not be less than $83 million.
10.11. DOMINATION AGREEMENT: Seller shall have delivered to Purchaser evidence
reasonably satisfactory to Purchaser that the domination agreement between
Invensys Flow Control GmbH and BTR Industries GmbH was terminated on or before
the Closing Date.
10.12. REQUIRED NOTICES: Each member of Seller Group or Purchased Subsidiary, as
the case may be, shall have completed the information and consultation procedure
described in Section 8.28, in accordance with the requirements of Section 8.28.
10.13. SUBLEASE: The appropriate subsidiaries of Seller shall have entered into
the leases described in Section 7.17.
ARTICLE XI.
Conditions to Obligations of Seller
The obligations of Seller under this Agreement are, at its option, subject
to the fulfillment, on or before the Closing Date, of each of the following
conditions precedent:
11.1. PERFORMANCE OF COVENANTS: Purchaser shall have performed and complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or before the Closing Date.
11.2. REPRESENTATIONS AND WARRANTIES: The representations and warranties of
Purchaser contained in this Agreement shall be true and correct in all material
respects as of the Closing Date, as though made on and as of the Closing Date,
except (a) for each of the representations and warranties of Purchaser contained
herein that are limited by materiality, which shall be true and correct in all
respects as of the Closing Date; (b) to the extent of changes or developments
contemplated by the terms of the Agreement; and (c) for representations and
warranties that speak as of a specific date or time (which need only be true and
correct as of such date or time); and Seller shall have received at the Closing
a certificate of an officer of Purchaser, dated as of the Closing Date, to such
effect.
11.3. GOVERNMENT FILINGS, CONSENTS AND APPROVALS: All applicable waiting periods
(including any extensions thereof) required under the HSR Act shall have expired
or been terminated, and all Competition Approvals shall have been made or
obtained.
11.4. NO PROCEEDINGS: There shall not be pending, any claim, suit, action or
other proceeding brought by a governmental agency before any court of
governmental agency, seeking to prohibit or restrain the transactions
contemplated by this Agreement or seeking material damages in connection
therewith.
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11.5. AUTHORIZATION: All action necessary to authorize the execution, delivery
and performance of this Agreement and each of the Related Documents, and the
consummation of the transactions contemplated hereby and thereby shall have been
duly and validly taken by Purchaser and any Purchaser Designee, and Purchaser
and each Purchaser Designee shall have full power and right to consummate the
transactions contemplated hereby and thereby.
11.6. SECRETARY'S CERTIFICATE: Purchaser shall have delivered to Seller a
certificate of the Secretary or Assistant Secretary of Purchaser as to the
corporate resolutions authorizing the execution and delivery of this Agreement
and the transactions contemplated thereby and the incumbency and authority of
the person(s) signing this Agreement and the Related Documents for Purchaser.
11.7. ESCROW AGREEMENT: Purchaser shall have entered into the Escrow Agreement
referred to in Section 7.7 of this Agreement, to the extent required by such
section.
11.8. SUBLEASE: The appropriate subsidiaries of Purchaser shall have entered
into the leases described in Section 7.17.
ARTICLE XII.
Employee Matters
12.1. SCOPE OF SECTION: This Article XII contains the covenants and agreements
of the parties with respect to (a) the status of employment of the Business
Employees and Former Employees and (b) Benefit Plans.
12.2. TRANSFER OF EMPLOYMENT - GENERAL PRINCIPLES:
(a) As of the Closing Date, Purchaser or one of its Affiliates shall (i)
make offers of employment at an equivalent base salary or wage level to all
Business Employees not employed by a Purchased Subsidiary immediately prior to
the Closing and (ii) cause the Purchased Subsidiaries to continue to employ
their respective Business Employees at an equivalent base salary or wage level.
Business Employees of the Purchased Subsidiaries whose employment is continued
hereunder and Business Employees not employed by a Purchased Subsidiary who
accept Purchaser's offer of employment and commence active employment with
Purchaser or its Affiliates shall be considered "Transferred Employees"
hereunder as of the Closing; provided that a Business Employee not employed by a
Purchased Subsidiary shall not be considered a Transferred Employee until the
date such Business Employee reports to active employment with Purchaser or one
of its Affiliates, which must in any case occur within 180 calendar days after
the Closing.
(b) For one year after the Closing, Purchaser shall, and shall cause the
Purchased Subsidiaries, as applicable, to provide employee benefits (including,
without limitation, medical and dental benefits) to Transferred Employees that
in the aggregate are substantially similar to those benefits provided by
Purchaser or its Affiliates to its similarly situated employees and such other
terms and conditions of employment as may be required by applicable law. Subject
to the obligations of Seller and its Affiliates under Section 12.4, Purchaser
shall, and shall cause the Purchased Subsidiaries to, assume, honor and/or
continue to perform all obligations of Seller and its Affiliates under all
Business Benefit Plans and Collective Bargaining Agreements in
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accordance with their terms. Purchaser shall, and shall cause each of the
Purchased Subsidiaries to, waive any pre-existing condition exclusions (except
with respect to conditions excluded from coverage under the Benefit Plans
immediately prior to the Closing Date by reason of being considered excluded
pre-existing conditions thereunder) and actively at work requirements and
provide that any expenses incurred on or before the Closing Date by a
Transferred Employee or a Transferred Employee's covered dependent shall be
taken into account for purposes of satisfying applicable deductible, coinsurance
and maximum out-of-pocket provisions if such amounts are applicable to the same
calendar year in which the Closing Date occurs, in each case, under any
applicable welfare plan of Purchaser or its Affiliates, provided that such
information is provided to Purchaser within 60 days following the Closing Date.
(c) With regard to Transferred Employees who performed at least one year of
service with Seller or a Purchased Subsidiary prior to the Closing, Purchaser
shall cause each employee benefit plan or compensation arrangement established,
maintained or contributed to by Purchaser or its Affiliates in which such
Transferred Employee participates to grant any such Transferred Employee credit
for all service with Seller or a Purchased Subsidiary, as applicable, for
purposes of eligibility and vesting (and not for benefit accrual purposes) with
respect to any employee pension benefit plan as defined in Section 3(2) of ERISA
or any similar foreign benefit plan, and for purposes of eligibility and
determining the amount of any benefit with respect to any vacation program and
any employee welfare benefit plan as defined in Section 3(1) of the Code or any
similar foreign benefit plan (including, without limitation, Purchaser's or its
Affiliate's severance plans and policies in effect from time to time).
(d) [INTENTIONALLY OMITTED].
(e) Seller and its Affiliates shall remain solely responsible after the
Closing for all liabilities in respect of severance, redundancy and similar pay,
salary continuation, and similar obligations arising under any Benefit Plan
relating to the termination or alleged termination of any Business Employee's or
Former Employee's employment with Seller and its Affiliates on or prior to the
Closing Date, except to the extent that such liability arises solely as a result
of Purchaser's failure to comply with its obligations under this Section 12.2.
Purchaser shall be solely responsible for all liabilities in respect of
severance, redundancy and similar pay, salary continuation, and similar
obligations relating to the termination or alleged termination under any
Business Benefit Plan of any Transferred Employee's employment occurring after
the Closing. Nothing in this Agreement shall be interpreted as restricting or
limiting the right or ability of Purchaser or its Affiliates to terminate the
employment of Transferred Employees after the Closing.
(f) Seller and its Affiliates shall be solely responsible after the Closing
for (i) claims for the type of benefits described in Section 3(1) of ERISA
(whether or not covered by ERISA) ("Welfare Benefits") that are incurred under
any Benefit Plan by or with respect to any Business Employee or Former Employee
before the Closing Date (provided that Seller shall only be responsible for
medical and healthcare benefits described in this clause (f)(i) to the extent
such benefits exceed $1,500,000), and (ii) claims relating to COBRA coverage
under any Benefit Plan attributable to "qualifying events" that occur before the
Closing Date. Purchaser and its Affiliates shall be solely responsible after the
Closing for (X) claims for Welfare Benefits that are incurred by or with respect
to any Business Employee on or after the Closing Date (Y) up to
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the first $1,500,000 of medical and healthcare benefits incurred before the
Closing Date under any Benefit Plan by or with respect to any Business Employee
or Former Employee, and (Z) claims relating to COBRA coverage attributable to
"qualifying events" with respect to any Transferred Employee that occur after
the date such individual becomes a Transferred Employee hereunder. For purposes
of the foregoing, a medical/dental claim shall be considered incurred when the
services are rendered or the supplies are provided, and not when the condition
arose.
(g) Purchaser and its Affiliates shall assume and/or continue to be
responsible for, and shall indemnify and hold Seller and its Affiliates harmless
against, any and all obligations and liabilities that arise under any Benefit
Plan that provides pension, early retirement or similar benefits (including, but
not limited to, TFR in Italy and long service jubilee benefits) to Business
Employees and/or Former Employees in Austria, Belgium, Germany, France, Italy,
Sweden and the United Kingdom (but in the United Kingdom, only in respect of
Business Employees). Schedule 12.4(a) shall govern the transfer of assets and
liabilities with respect to the Benefit Plans that provide pension or early
retirement benefits to Business Employees in the United Kingdom.
(h) Prior to May 30, 2002, neither Seller nor any of its Affiliates will
permit any Business Employee that currently participates in the Invensys
Executive Bonus Plan 2001/2002 to become a participant in or enter into any new
plan or arrangement that provides for any performance based bonus or award
without the consent of Purchaser, unless required by law or an existing
agreement. With respect to all other Business Employees, Purchaser shall have
the right to consult with Seller prior to Seller or any of its Affiliates
establishing or adopting any new plan or arrangement that provides for any
performance based bonus or award, except for any plan or arrangement required by
law or existing agreement. Seller and its Affiliates shall be responsible for
and shall indemnify and hold harmless the Purchaser and its Affiliates for all
bonuses payable to Business Employees and Former Employees in respect of any
performance period ending on or prior to the Closing Date. Purchaser and its
Affiliates shall be responsible for and shall indemnify and hold harmless the
Seller and its Affiliates for all bonuses payable to Business Employees and
Former Employees in respect of any performance period beginning after March 31,
2002.
(i) Sellers shall take such action as is necessary to vest on the Closing
Date all outstanding stock options or other equity-based awards held by, or
granted to, Business Employees and to permit Business Employees to exercise such
awards during a period of no less than 30 days after the Closing Date (or such
longer period specified by the applicable plan). Sellers shall be responsible
for any and all payments, withholding and reporting obligations that arise on or
after the Closing Date related to such stock options or other stock awards.
12.3. U.S. EMPLOYEES: For purposes of this Section 12.3, "U.S. Business
Employees" and "U.S. Transferred Employees" means all Business Employees and
Transferred Employees, respectively, employed primarily within the United
States.
(a) The Invensys Pension Plan (the "U.S. Salaried Pension Plan") covers
substantially all non-represented U.S. Business Employees and certain Former
Employees. Effective as of the Closing Date, all U.S. Business Employees who
have completed at least one year of service
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as of the Closing Date shall (i) be vested in their accrued benefit earned
through the Closing Date under the U.S. Salaried Pension Plan and any
non-qualified retirement plan (such as an excess or supplemental plan) (a
"Non-Qualified Plan"), and (ii) be eligible for a normal, early or deferred
vested retirement benefit under the U.S. Salaried Pension Plan and any
Non-Qualified Plan based upon such U.S. Business Employees having terminated
active participation under the plan on the Closing Date, and such U.S. Business
Employee's age and years of service under the plan as of that date. Distribution
of the normal, early or deferred vested retirement benefit accrued by any U.S.
Business Employee, including without limitation, the time of benefit payment and
the form in which the benefit is payable, shall be determined in accordance with
the applicable terms of the U.S. Salaried Pension Plan and any Non-Qualified
Plan. Purchaser shall not have any liability with respect to the U.S. Salaried
Pension Plan or any Non-Qualified Plan.
(b) As of the Closing Date, Purchaser shall adopt and become the successor
sponsor of the Edwards Valve, Inc. Pension Plan for Bargaining Unit Employees
(the "U.S. Bargaining Pension Plan"). As of the Closing Date, the Purchaser
shall assume all of Seller's and its Affiliate's liabilities and obligations
with respect to the U.S. Bargaining Pension Plan, including without limitation
all obligations to make contributions required to be made to the U.S. Bargaining
Pension Plan. Purchaser shall execute such documents as may be reasonably
requested by Seller to effect such adoption and assumption. Seller shall cause
the trustee of the master trust in which the U.S. Bargaining Pension Plan
participates (the "Master Trust"), as of the Master Trust's valuation date next
following the Closing Date (the "Valuation Date"), to value, in a manner
consistent with its prior practice, the U.S. Bargaining Pension Plan's allocable
share of the assets of the Master Trust (the "U.S. Bargaining Plan Asset
Value"). As soon as practicable after the determination of the U.S. Bargaining
Plan Asset Value, Seller shall cause the trustee of the Master Trust to transfer
to a successor trustee designated by Purchaser an amount in cash or other
property mutually agreeable to Seller and Purchaser equal to the U.S. Bargaining
Plan Asset Value (i) increased by interest during the period from the Valuation
Date to the date of transfer (the "Interim Period") at a rate of 5% per annum
(the "Interest Rate") and (ii) reduced by (A) benefit payments to employees or
their beneficiaries made in accordance with the provisions of the U.S.
Bargaining Pension Plan during the Interim Period plus interest on such benefit
payments at the Interest Rate from the date of payment until the transfer date
and (B) an allocable share of fees and expenses incurred by the Master Trust
during the Interim Period; provided, however, that no transfer pursuant to this
Section 12.3(b) shall be made until the Purchaser provides satisfactory evidence
in the form of a favorable determination letter issued by the Internal Revenue
Service or an opinion letter of counsel reasonably acceptable to Seller that the
successor trust related to the U.S. Bargaining Pension Plan satisfies after the
Closing Date the requirements for qualification under Section 401(a) of the
Code, which evidence Purchaser shall provide to Seller within 60 days after the
Closing Date.
(c) The accounts under the Invensys 401(k) Plan (the "Investment Plan") of
all Business Employees who participate in such Investment Plan on the Closing
Date shall be fully vested as of the Closing Date and shall be distributable
according to the terms of such plan. Seller acknowledges that on and after the
Closing Date the account balances of such Business Employees shall be
distributable from such Investment Plan in accordance with Section 401(k)(2) of
the Code. Purchaser will cause a retirement plan maintained by Purchaser
intended to qualify under Section 401(a) of the Code and which contains a cash
or deferred feature under
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Section 401(k) of the Code ("Purchaser 401(k) Plan") to accept direct rollovers
pursuant to Section 401(a)(31) of the Code of distributions from the Investment
Plan to Transferred Employees to the extent permitted by law (including direct
rollovers of such Transferred Employees' outstanding loans and any promissory
notes or other documents evidencing such loans). Seller also agrees to
facilitate the continued repayment of participant loans into the Investment Plan
by Transferred Employees until such Transferred Employees become eligible to
participate in the Purchaser 401(k) Plan. Seller and Purchaser shall cooperate
with each other (and cause the trustees of the Investment Plan and Purchaser
401(k) Plan to cooperate with each other) with respect to the rollover of the
distributions to the participants.
(d) The accounts under the Seller's Flexible Benefits Program of all
Business Employees who participate in such plan on the Closing Date shall be
available according to the terms of such plan for the reimbursement of eligible
claims incurred while the Business Employee was covered under the plan.
(e) Purchaser shall assume and be solely responsible for, and shall
indemnify Seller and its Affiliates from and against, any and all liability for
post-retirement medical and life insurance benefit obligations to all
Transferred Employees under any U.S. Benefit Plans. Nothing herein shall
preclude the Purchaser from amending any employee benefit plan providing welfare
benefits to Transferred Employees following the Closing. Seller shall continue
to be solely responsible for, and shall indemnify Purchaser from and against,
any and all liability for post-retirement medical and life insurance benefit
obligations to all Former Employees under any U.S. Benefit Plans.
12.4. ALLOCATION OF EMPLOYEE LIABILITIES GENERALLY:
(a) Except as explicitly set forth in or otherwise explicitly provided in
this Article XII and for liabilities specifically included in the Restructuring
Provision, Seller and its Affiliates shall be solely responsible after the
Closing for, and shall indemnify and hold Purchaser and its Affiliates harmless
against, any and all obligations and liabilities: (i) explicitly assumed or
retained by Seller or its Affiliates in this Article XII, (ii) that have arisen
or may arise under or in connection with any Seller Benefit Plan, (iii) that
have arisen or may arise in connection with or related to any current or former
employee of Seller or its Affiliates who is not considered a Business Employee
or Former Employee hereunder, (iv) that have arisen or may arise in connection
with a Business Employee or Former Employee that is related primarily to a
period prior to the Closing during which such individual was employed wholly or
predominately with the Seller or one of its Affiliates other than with the
Business, (v) relating to retirement benefits provided to Former Employees or
retirement or early retirement benefits accrued as of the Closing Date with
respect to Business Employees, or (vi) relating to any retention bonuses that
may become payable to any individual listed in items A1 through A12 listed on
Schedule 8.10(g) under any agreements between Seller or its Affiliates and such
individuals that are in effect at the Closing and (v) related to the failure of
Seller or its Affiliates to comply with any employee notification or
consultation requirements of applicable law (unless such failure is caused by
the failure of the Purchaser or any of its Affiliates to (i) reasonably
cooperate with, or provide requested information to, the Seller in connection
with its efforts to comply with such law or (ii) a failure by Purchaser to
comply with any employee notification or consultation requirements of applicable
law). In addition, Seller and its Affiliates shall be solely responsible
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for any and all Controlled Group Liabilities. "Controlled Group Liabilities" are
any and all liabilities (A) under Title IV of ERISA, (B) under Section 302 of
ERISA, (C) under Sections 412 and 4971 of the Code, and/or (D) as a result of a
failure to comply with the continuation coverage requirements of Section 601 et
seq. of ERISA and Section 4980B of the Code or the group health plan
requirements of sections 701 et seq. of the Code and Section 701 et seq. of
ERISA, in each case relating to any employee benefit plan sponsored, maintained
or contributed to by Seller or any ERISA Affiliate.
(b) Except as explicitly set forth in or otherwise explicitly provided in
this Article XII, Purchaser and its Affiliates shall be solely responsible for
and shall indemnify and hold Seller and its Affiliates harmless against any and
all obligations and liabilities: (i) that arise under any benefit plan of
Purchaser or its Affiliates (including Business Benefit Plans after the
Closing), (ii) that have arisen or may arise in connection with, or that are
related to, the employment of a Business Employee or Former Employee, whether
prior to, on or after the Closing Date and (iii) caused by Purchaser's violation
of this Article XII.
12.5. SOUTH AFRICAN EMPLOYEES: With effect from the Closing, Invensys South
Africa (Proprietary) Limited hereby transfers to the Business Purchaser
designated by Purchaser, as contemplated in section 197 of the Labour Relations
Act, No. 66 of 1995 ("LRA"), all the contracts of employment of the Business
Employees employed by Invensys South Africa (Proprietary) Limited (the "South
African Employees"), on the same terms and conditions as those pertaining to the
South African Employees as of the Closing. The parties agree that no agreements
contemplated in section 197(3) of the LRA have been or will be concluded. With
respect to the Target Assets of Invensys South Africa (Proprietary) Limited, the
parties further agree that, for all purposes of federal and local law of South
Africa, the transactions contemplated hereby shall constitute a sale as a going
concern. The Purchaser and the Seller shall use their respective reasonable best
endeavors to procure that the Purchaser or a Purchaser designee is substituted,
with effect from the Closing Date, for all purposes as the participating
employer in the place of Invensys SA (Pty) Ltd in relation to the Orion Money
Purchase Provident Fund and the Orion Money Purchase Pension Fund, and the
Purchaser hereby indemnifies the Seller accordingly.
12.6. U.K. EMPLOYEES:
(a) In this Section 12.6 "U.K. Business Employees" mean individuals
employed wholly or predominantly in the Flow Control division of BTR Industries
Limited.
(b) Notwithstanding anything to the contrary contained herein, the Transfer
of Undertakings (Protection of Employment) Regulations 1981 (the "Regulations")
will apply to the transfer of the flow control division of BTR Industries
Limited under this Agreement, so that the contracts of employment of the U.K.
Business Employees (except in respect of terms relating to occupational pension
arrangements) will have effect from the Closing Date as if originally made
between the Business Purchasers and the U.K. Business Employees. In the event
that the provisions of the Regulations conflict with the provisions of Article
12.2, the provisions of Article 12.6 shall prevail.
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(c) (i) If for any reason the contract of employment of any employee of BTR
Industries Limited who is not a U.K. Business Employee is found or alleged to
have effect after the Closing Date as if originally made with the Business
Purchasers, the Seller, in consultation with the Business Purchasers, will,
within 14 days of being so requested by the Business Purchasers, make to that
person an offer in writing to employ him under a new contract of employment, to
take effect upon the termination referred to in clause (ii) herein, identical in
all respects to that person's contract of employment immediately before the
Closing Date. However, the Business Purchasers must make the request no later
than 15 days after becoming aware of the finding or allegation.
(ii) Once that offer has been made (or after the expiry of 14 days
after it has been requested), the Business Purchasers may terminate the
employment of the person concerned and, so long as that termination is effected
within four months after the Closing Date, the Seller will indemnify the
Business Purchasers against the costs of that person's employment, the
termination of that employment or any costs resulting from such termination and
any liabilities or costs relating to that person, or to any person who is
alleged to have transferred.
(d) (i) If the contract of employment of any U.K. Business Employee is
found or alleged not to have effect after the Closing Date as if originally made
with the Business Purchasers, other than by virtue of Regulation 5(4A) of the
Regulations, the Business Purchasers, in consultation with the Seller, will,
within 14 days of being so requested by the Seller, make to that Business
Employee an offer in writing to employ him under a new contract of employment,
to take effect upon the termination referred to in clause (ii) herein, on terms
and conditions which (other than the identity of the employer and any terms and
conditions relating to an occupational pension scheme) will not differ from the
corresponding provisions of the U.K. Business Employee's contract of employment
immediately before the Closing Date. However, the Seller must make the request
no later than 15 days after the Seller becomes aware of such finding or
allegation.
(ii) Once that offer has been made (or after the expiry of 14 days
after it has been requested), the Seller shall terminate the employment of the
U.K. Business Employee concerned and, so long as that termination is effected
within four months after the Closing Date, the Business Purchasers shall
indemnify the Seller against the costs of that U.K. Business Employee's
employment and its termination.
(e) The Business Purchasers shall indemnify the Seller against any claim in
respect of the employment of any U.K. Transferred Employee during the period
after the Closing Date including, without limitation, (i) any changes to terms
and conditions of employment by the Business Purchasers; (ii) any termination of
the employment of any U.K. Transferred Employee by the Business Purchasers after
the Closing Date; and (iii) any failure by the Business Purchasers to comply
with its obligations under Regulation 10(3) of the Regulations.
(f) The Seller shall indemnify the Purchaser against any liabilities,
claims, losses, costs and expenses the Purchaser may incur as a result of the
Seller's failure to inform and consult in accordance with Regulation 10 of the
Regulations.
12.7. AUSTRALIAN SUPERANNUATION ARRANGEMENTS:
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(a) Unless otherwise provided for in this Section 12.7, Sections 12.4(a),
12.2(f) and (g), shall not apply in respect of any Benefit Plan to which
Invensys Flow Control Australasia Pty Ltd. ("IFC Australasia") contributes, or
any other superannuation arrangements or obligations of IFC Australasia
("Australian Superannuation Arrangements").
(b) Any provision of this Agreement applicable to a Benefit Plan and which
refers to a law of the United States of America, or to any other jurisdiction
other than Australia, does not apply with respect to the Australian
Superannuation Arrangements to the extent of that reference.
(c) Schedule 8.10(f) lists each Australian Superannuation Arrangement which
is a Foreign Benefit Plan ("Australian Benefit Plan").
(d) None of the Purchaser, the Target Subsidiaries and their respective
Affiliates shall adopt or become a sponsoring employer of the Invensys Australia
Superannuation Fund.
(e) Where an employee of IFC Australasia who will continue in employment
with IFC Australasia after the Closing Date ("Australian Business Employee") is
a member of the Invensys Australia Superannuation Fund or another superannuation
arrangement to which the Purchaser is not permitted to contribute after the
Closing Date ("Previous Fund"):
(i) the Purchaser shall use its best endeavours to ensure that, as
soon as reasonably practicable after the Closing Date, it makes
arrangements for that Australian Business Employee to become a member of an
alternative superannuation fund ("Purchaser's Fund") which will provide for
that Australian Business Employee benefits which are no less favourable
than those conferred by the Previous Fund, where the previous Fund is a
defined contribution plan. If the Previous Fund is a defined benefit plan,
the Purchaser's fund will provide retirement benefits comparable to its
similarly situated employees of Purchaser. The Purchaser must ensure that
the Purchaser's Fund will be a "Complying Fund" as defined under the
Superannuation Industry (Supervision) Act 1993 and that the Purchaser's
Fund otherwise complies with all applicable statutory requirements;
(ii) the Purchaser shall make superannuation contributions from the
Closing Date in respect of the Australian Business Employee to the
Purchaser's Fund at the applicable rate so as not to incur a superannuation
guarantee charge liability under the Superannuation Guarantee Charge Act
1992 (Commonwealth of Australia);
(iii) the Seller and Purchaser must, as soon as reasonably practicable
after the Closing Date, use their respective best endeavours to procure
that the trustee of the Previous Fund provides the Australian Business
Employee with the option of transferring their benefit entitlements, as
determined under the trust deed of each Previous Fund ("Benefit
Entitlements") to the Purchaser's Fund. The Benefit Entitlements in respect
of a defined benefit plan member will be an amount determined by an actuary
to be equitable in accordance with the trust deed of the Previous Fund;
(iv) the Seller must use its best endeavours to procure the payment
from the Previous Fund to the Purchaser's Fund of the Benefit Entitlements
of any Business
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Employee who elects (in accordance with the applicable trust deed) to
transfer their Benefit Entitlement to the Purchaser's Fund. Unless
otherwise provided for in the applicable Previous Fund trust deed, Benefit
Entitlements are to be calculated as at the date of payment; and
(v) for the avoidance of doubt, it is expressly acknowledged and
agreed that if a Business Employee who is a member of a Previous Fund does
not elect to transfer his or her Benefit Entitlement to the Purchaser's
Fund, his or her Benefit Entitlement will be dealt with in accordance with
the trust deed of their Previous Fund.
(f) Where sub-clause (e) above does not apply, the Purchaser shall ensure
that from the Closing Date, it makes superannuation contributions in respect of
the Australian Business Employees to the same superannuation funds to which the
Seller was contributing immediately prior to the Closing Date. Such
contributions shall be made at the applicable rate so as not to incur a
superannuation guarantee charge liability under the Superannuation Guarantee
Charge Act 1992 (Commonwealth of Australia).
(g) The Purchaser shall provide Australian Business Employees with
information about the matters set out in this Section 12.7 to enable them to
understand the superannuation arrangements made by the Purchaser with respect to
the Australian Business Employees after the Closing Date.
12.8. SWEDEN: As of the Closing Date, Purchaser shall assume the liability and
obligation to secure NAF Industries AB's repayment to FPG, Forsakringsbolaget
Pensionsgaranti Omsesidigta of any amounts which FPG may pay relating to NAF
Industries AB's pension commitments and that are covered by credit insurance
issued by FPG. The liability and obligation is presently secured by Invensys plc
by a surety bond issued to FPG on December 21, 2001 and to which Section 15.6
thus shall apply.
ARTICLE XIII.
Obligations After Closing
13.1. ACCESS: In connection with any of the Retained Liabilities or any
financial audit of Seller or any Claim or governmental investigation of Seller
for any matter relating to any period prior to the Closing, or for any other
reasonable and lawful purpose, Purchaser shall, upon request, permit Seller and
its representatives to have access, at reasonable times during normal business
hours and in a manner which is not unreasonably disruptive to the operations of
Purchaser, to the operating records, data and other materials maintained by or
on behalf of the Business, including, without limitation, production data,
engineering records, personnel and payroll records, manufacturing and quality
control records and procedures, research and development files, intellectual
property disclosures and accounting records, customer lists and records,
supplier lists and records, and other materials relating to the foregoing items
(the "Purchased Records") and work papers, books and records of Purchaser
relating to the Business. Purchaser shall maintain in an orderly manner, and
shall not dispose of, the Purchased Records or such work papers, books and
records during the six-year period beginning with the Closing Date without
Seller's prior written consent which consent shall not be unreasonably withheld
or delayed. Following the expiration of such six-year period, Purchaser may
dispose of the
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Purchased Records or such work papers, books and records at any time upon giving
90 calendar days prior written notice to Seller, unless Seller agrees to take
possession thereof within such 90 calendar days at no expense to Purchaser.
After the Closing, upon reasonable written notice, Seller and Purchaser shall
furnish or cause to be furnished to each other and their affiliates and their
respective employees, counsel, auditors and representatives access, at
reasonable times during normal business hours and in a manner which is not
unreasonably disruptive to the operations of the other party, to such
information and assistance relating to the Purchased Subsidiaries and the Target
Assets (to the extent within the control of such party) as is reasonably
necessary for financial reporting and accounting matters.
13.2. FURTHER ASSURANCES: From time to time after the Closing, without further
consideration, the parties shall cooperate with each other and shall execute and
deliver instruments of transfer or assignment, or such other documents to the
other party as such other party reasonably may request to evidence or perfect
Purchaser's right, title and interest to the Target Assets, the Purchased
Subsidiaries and the assets of the Purchased Subsidiaries, and otherwise carry
out the transactions contemplated by this Agreement. Without limiting the
provisions of this Section 13.2, to the extent that Purchaser and/or any
Purchased Subsidiary discover any additional intellectual property which should
have been transferred to Purchaser as Seller Intellectual Property, Seller
shall, and shall procure that the relevant member(s) of Seller Group shall,
cooperate with Purchaser and execute and deliver any instruments of transfer or
assignment reasonably necessary to transfer and assign such intellectual
property to Purchaser and/or the relevant Purchased Subsidiary, and Purchaser
shall be solely responsible for all costs relating to the preparation and the
filing or other recordation of any such instruments of transfer or assignment.
Without limiting the provisions of this Section 13.2, to the extent that Seller
discovers any intellectual property which does not constitute Seller
Intellectual Property and/or which was inadvertently or otherwise mistakenly
transferred to Purchaser or an Affiliate of Purchaser or retained with a
Purchased Subsidiary and/or which is an Excluded Asset which is inadvertently or
otherwise mistakenly transferred to Purchaser or an Affiliate of Purchaser or
retained with a Purchased Subsidiary as Seller Intellectual Property, Purchaser
or the Purchased Subsidiary, as appropriate, shall, and shall procure that the
relevant Affiliates of Purchaser shall, cooperate with Seller and execute and
deliver any instruments of transfer or assignment reasonably necessary to
transfer and assign such intellectual property back to Seller or the Affiliate
of Seller which Seller designates, or otherwise re-vest in Seller or its
designated Affiliate title to such intellectual property.
13.3. POST-CLOSING COOPERATION:
(a) Seller and Purchaser shall cooperate with each other, and shall cause
their affiliates and their officers, employees, agents, auditors and
representatives to cooperate with each other, for a period of 180 days after the
Closing to ensure the orderly transition of the Business from the Seller Group
to Purchaser and to minimize any disruption to the Business and the other
respective businesses of Seller and Purchaser that might result from the
transactions contemplated hereby.
(b) Each party shall reimburse the other for reasonable out-of-pocket costs
and expenses incurred in assisting the other pursuant to this Section 13.3.
Neither party shall be required by this Section 13.3 to take any action that
would unreasonably interfere with the
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conduct of its business or unreasonably disrupt its normal operations (or, in
the case of Purchaser, those of the Business).
13.4. REQUIRED ACCESS. In connection with the indemnification obligations of
Seller set forth in Section 16.6 of this Agreement, Purchaser shall cooperate
with all reasonable requests of Seller to provide timely, appropriate and
reasonable access to Seller (or its designees, including any parties necessary
for Seller to comply with the terms of any indemnification agreements which are
referred to in Sections 1.2(i), 1.2(j) and 1.2(k) and Schedule 1.2) to the
Purchaser's property, business records, employees, and data and agrees to enter
into mutually acceptable access agreements in connection therewith.
ARTICLE XIV.
Notices
All notices, consents, approvals or other notifications required of the
parties under this Agreement shall be in writing and shall be deemed properly
served if delivered personally or sent by registered or certified mail (return
receipt requested), facsimile or nationally recognized courier or overnight
delivery service addressed to such other party at the address set forth below,
or at such other address as may hereafter be designated by either party in
writing, and shall be deemed delivered (i) five Business Days after being sent
by mail or (ii) when actually delivered if sent by mail, facsimile, courier or
overnight delivery service (or the next Business Day if delivered after regular
business hours or on a Saturday, Sunday or holiday).
(a) If to Seller:
Invensys plc
Invensys House
Carlisle Place
London, SW1P 1
BX United Kingdom
Attention: General Counsel
Facsimile: +44-207-834-3879
With a copy to:
Fried, Frank Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Attention: Sanford Krieger
Jeffrey Bagner
Facsimile: 212-859-4000
(b) If to Purchaser:
Flowserve Corporation
222 W. Las Colinas Blvd.
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Irving, Texas 75039
Attention: Ronald F. Shuff
Facsimile: 972-443-6843
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7473
Attention: Kevin Grehan
Facsimile: 212-474-3700
ARTICLE XV.
Further Covenants
15.1. COOPERATION BY PURCHASER: In the event Seller is required to defend
against, or desires to prosecute, any action, suit or proceeding arising out of
a Claim pertaining to the business or operations of the Business prior to the
Closing Date, Purchaser shall provide such assistance and cooperation,
including, without limitation, witnesses and documentary or other evidence as
may reasonably be requested by Seller in connection with its defense. Seller
shall reimburse Purchaser for its reasonable out-of-pocket expenses (but not
including any allocations of salaries or other overhead) incurred in providing
such assistance and cooperation.
15.2. COOPERATION BY SELLER: In the event Purchaser is required to defend
against, or desires to prosecute, any action, suit or proceeding arising out of
a Claim pertaining to a liability assumed or asset acquired by Purchaser
pursuant to this Agreement relating to the business or operations of the
Business prior to the Closing Date, Seller shall provide such assistance and
cooperation, including, without limitation, witnesses and documentary or other
evidence as may reasonably be requested by Purchaser in connection with its
defense. Purchaser shall reimburse Seller for its reasonable out-of-pocket
expenses (but not including any allocations of salaries or other overhead)
incurred in providing such assistance and cooperation.
15.3. CONFIDENTIALITY:
(a) Purchaser acknowledges that all information provided to any of it and
its Affiliates, agents and representatives by Seller and its Affiliates, agents
and representatives is subject to the Confidentiality Agreement the terms of
which are hereby incorporated herein by reference. Effective upon, and only
upon, the Closing, the Confidentiality Agreement shall terminate; provided,
however, that Purchaser acknowledges that the Confidentiality Agreement shall
terminate only with respect to information provided to any of Purchaser and its
Affiliates, agents or representatives that relates to the Business or otherwise
is used in the ordinary course of business of the Business; and provided
further, however, that Purchaser acknowledges that any and all information
provided or made available to any of it and its Affiliates, agents and
representatives by or on behalf of the Sellers (other than information relating
to Purchased
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Assets or the Business) shall remain subject to the terms and conditions of the
Confidentiality Agreement after the Closing Date.
(b) Purchaser agrees that, after the Closing Date, Purchaser shall, and
shall use all reasonable efforts to cause its directors, officers, employees,
advisors and Affiliates to, keep the Seller Information (as defined below)
confidential following the Closing Date, except that any such Seller Information
required by law or legal or administrative process to be disclosed may be
disclosed without violating the provisions of this Section 15.3(b). For purposes
of this Agreement, the term "Seller Information" shall mean all information
concerning Seller or its Affiliates, including any trade secrets, know-how and
other confidential technical, business and financial information, other than
information that relates to the Business or the Purchased Assets or otherwise is
used in the ordinary course of business of the Business and other than any such
information that is available to the public on the Closing Date, or thereafter
becomes available to the public other than as a result of a breach of this
Section 15.3(b), or is independently developed without access to or without the
benefit of the Seller Information.
(c) Seller agrees that, after the Closing Date, Seller shall, and shall use
all reasonable efforts to cause its directors, officers, employees, advisors and
Affiliates to, keep Purchaser Information (as defined below) confidential
following the Closing Date, except that any such Purchaser Information required
by law or legal or administrative process to be disclosed may be disclosed
without violating the provisions of this Section 15.3(c). For purposes of this
Agreement, the term "Purchaser Information" shall mean all information
concerning the Business or Purchaser or Affiliates of Purchaser, including any
trade secrets, know-how and other confidential technical business and financial
information, other than information that is used in the ordinary course of
business of Seller and other than any such information that is available to the
public on the Closing Date, or thereafter becomes available to the public other
than as a result of a breach of this Section 15.3(c), or is independently
developed without access to or without the benefit of the Purchaser Information.
15.4. INSURANCE:
(a) Purchaser acknowledges and agrees that upon Closing all insurance
coverage provided in relation to the Business pursuant to policies maintained by
Seller or its Affiliates (other than the Purchased Subsidiaries) (whether such
policies are maintained with third party insurers or with Seller or its
Affiliates (other than the Purchased Subsidiaries)) shall cease and no further
liability shall arise under any such policies that are "claims made" basis
policies but (subject to the terms of any relevant policy) without prejudice to
any accrued claims which the Purchased Subsidiaries or any member of the Seller
Group (in the latter case in relation to the Business) may have at Closing,
provided that the Business shall retain the benefit of "occurrence" based
policies of insurance in relation to events occurring prior to Closing but in
respect of which no claim has at Closing crystallized.
(b) Purchaser and Seller agree that any claims made under the insurance
policies referred to in Section 15.4(a) in respect of the Business shall be
administered and collected by Seller (or by a claims handler appointed by
Seller) on behalf of Purchaser. Seller agrees to diligently pursue all such
claims on behalf of Purchaser. Purchaser shall cooperate fully with Seller to
enable Seller to comply with the requirements of the relevant insurer, and
Purchaser
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shall provide such information and assistance as Seller may reasonably request
in connection with any such claim. Any monies received by Seller as a result of
such claim shall be paid over to Purchaser, net of all reasonable costs and
expenses of recovery (including, without limitation, all reasonable
out-of-pocket handling and collection fees charged by any claims handler
appointed by Seller) no later than 20 Business Days following the receipt of
same into Seller's bank account.
(c) In respect of all claims under the insurance policies referred to in
Section 15.4(b) notified to insurers at the date of this Agreement and all
claims subsequently brought under such insurance policies and relating to the
Business, Purchaser acknowledges that it shall be responsible for the deductible
on each relevant insurance policy and will not be entitled to seek payment of
such deductible from Seller. Purchaser shall reimburse Seller within 20 Business
Days after receipt of the invoice for any deductible paid by Seller (including
evidence of such payment) after the Closing Date with respect to claims made
under the insurance policies referred to in Section 15.4(b) to the extent such
deductible has been paid by Seller or any of its Affiliates, or, if Purchaser is
invoiced directly by the insurance company for such deductible amount, it shall
pay or cause such invoice to be paid within 20 Business Days.
15.5. NON-SOLICITATION OF EMPLOYEES: Neither Seller, nor any of its Affiliates,
for itself or on behalf of any other person, will induce any Transferred
Employees who remain and are at the time employees of Purchaser or its
Affiliates, to terminate his or her relationship with Purchaser. Neither
Purchaser or any of its Affiliates nor the Business will induce any employee of
Seller's remaining businesses to leave his or her employment. These reciprocal
obligations shall continue for a period of two years from the date hereof,
except as the parties may otherwise agree. The use of an independent employment
agency (so long as it is not directed by Seller or Purchaser or their
Affiliates, as applicable, to solicit such employees) or newspaper advertising
and the hiring as a result thereof of any employee shall not be construed as a
breach of this Agreement.
15.6. RELEASE OF GUARANTEES: Purchaser will use commercially reasonable efforts
to cause Purchaser to be substituted in all respects for Seller and/or its
Affiliates that are not Purchased Subsidiaries and will use its best efforts to
cause Seller and/or its Affiliates that are not Purchased Subsidiaries, to be
released and fully discharged from, any responsibility or liability in respect
of any obligation under any guarantees no later than 30 days after the Closing
Date. Whether or not Purchaser is able to effect any such a substitution,
release, or discharge, from and after the Closing, Purchaser, and not Seller or
its Affiliates, will be solely responsible for performances and payment of all
obligations of Seller and/or its Affiliates in respect of such guarantees.
15.7. SETTLEMENT OF INTER-COMPANY TRADING ACCOUNTS: After the Closing Date, all
Inter-Company Trading Accounts open between the Business, on one hand, and the
Seller and/or its Affiliates (other than any Purchased Subsidiaries), on the
other hand, as of the Closing Date will be settled in accordance with the terms
in effect as of the Closing Date or, if no such terms are specified, then within
30 days after the Closing Date. "Inter-Company Trading Accounts" means trading
accounts entered into by the Business in the ordinary course with Seller or its
Affiliates (other than any Purchased Subsidiaries) relating to the provision of
goods or services by, to, or for the benefit of the Business.
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15.8. TRANSFER OF NOMINAL SHARES: With respect to the Purchased Subsidiaries as
to which directors or other nominees of Seller or its Affiliates own shares of
capital stock of any of the Purchased Subsidiaries for purposes of satisfying
requirements of applicable law, Seller and Purchaser shall take all necessary or
appropriate action to effect the transfer of such shares to new directors or
other nominees designated by Purchaser as, when and to the extent permitted by
applicable law.
15.9. INTELLECTUAL PROPERTY: As promptly as is reasonably practicable after the
Closing Date, Purchaser shall take such steps as are necessary to change the
name of any Purchased Subsidiary whose name includes a Retained Name. Purchaser
Designees and their Affiliates (including, without limitation, Purchaser and the
Purchased Subsidiaries) shall have the right to sell inventory included in the
Target Assets and the Purchased Subsidiaries containing the Retained Names in
the ordinary course and to use existing marketing and sales material with
appropriate stickering for a period of six months after the Closing Date so long
as no modifications are made to the inventory and the stickering is approved in
advance by Seller, such approval not to be unreasonably withheld, conditioned or
delayed. Purchaser, Purchaser Designees and their Affiliates irrevocably and
perpetually consent to the use and continued registration by Seller, Seller
Group and their affiliates, of the trademarks set out in Schedule 15.9 and their
use and registration of, including the filing of any additional applications for
registration of, the mark "Argus" in relation to or in connection with the
following products within international classes 7 and 9 (and corresponding
national and/or local classes): motors (of all types including without
limitation electric motors), machines and all equipment therefore and components
thereof. Purchaser, Purchaser Designees and their Affiliates shall not
challenge, oppose, or seek to cancel, nor assist any third party in taking any
of the foregoing actions with regard to, such use, filing of applications to
register, and registration of the "Argus" mark. All of Seller's, Seller Group's
and their affiliates' rights hereunder in relation to the use and registration
of the "Argus" mark shall be fully and freely assignable by Seller, Seller
Group, and their affiliates, and shall inure to the benefit of such assignees.
ARTICLE XVI.
Survival of Representations and Warranties and Indemnification
16.1. SURVIVAL: Except for (i) the representations and warranties of Seller in
Sections 8.1, 8.2, 8.3 and 8.5(a) and the first sentence of Section 8.6 and the
representations and warranties of Purchaser in Sections 9.1 and 9.3, which will
survive indefinitely and (ii) the representations and warranties in Section
8.15, which are governed solely by Article XVII, the representations and
warranties in this Agreement and in any other document delivered in connection
herewith shall survive the Closing until 24 months after the Closing Date.
Neither party shall have an indemnification obligation with respect to any
indemnification claim asserting a breach of a representation or warranty
contained in this Agreement if such claim is made after the end of the
applicable survival period. The covenants and agreements contained in this
Agreement (except for those contained in Article XVII, which are governed solely
by Article XVII) shall survive in accordance with their respective terms.
Notwithstanding the foregoing or anything to the contrary in this Agreement,
Seller's indemnification obligations under Section 16.6 shall terminate (i) with
respect to the breach of any representation and warranty set forth in Section
8.13, on the second anniversary of the Closing Date and (ii) with respect to all
other obligations under Section 16.6, on the tenth anniversary of the Closing
Date. For the avoidance of doubt, the
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Seller's obligations with respect to the Retained Liabilities (except for Taxes,
which are governed solely by Article XVII) and other liabilities retained by
Seller pursuant to this Agreement shall survive without limitation.
16.2. INDEMNIFICATION BY SELLER:
(a) From and after the Closing Date, Seller hereby agrees to indemnify,
defend and hold harmless Purchaser and the Purchaser Designees (including their
successors, assigns and transferees, if any) and their respective directors,
shareholders, officers, employees, agents, consultants, representatives,
Affiliates, successors and assigns from and against any and all loss, liability,
damage or expense (including reasonable attorney and consultant's fees and
expenses, collectively "Losses") arising out of (i) any breach of any
representation or warranty made by Seller in this Agreement (except those
contained in Section 8.13, which are governed by Sections 16.1 and 16.6, and
Section 8.15, which are governed solely by Article XVII), (ii) Seller's
obligations under Section 16.6, (iii) Seller's failure to pay or satisfy or
cause to be paid or satisfied (A) any of the Retained Liabilities or (B) any
liability retained by Seller pursuant to Article XII when due or payable; or
(iv) any breach or non-fulfillment of any covenant or agreement of Seller
contained herein or in any other document executed and delivered at the Closing
(except, in each case, those relating to Taxes, which are governed solely by
Article XVII).
(b) The amount of any Losses incurred by Purchaser and the Purchaser
Designees shall be reduced (i) by the net amount Purchaser and the Purchaser
Designees recover (after deducting all attorneys' fees, expenses and other costs
of recovery), from any insurer or other third party liable for such Losses and
(ii) where and to the extent the obligation giving rise to any such Losses was
specifically included in the determination of Net Book Value, and also shall be
reduced and increased in accordance with Section 17.1(e).
(c) The indemnity provided in Sections 16.2 and 16.6 shall be the sole and
exclusive remedy of Purchaser and the Purchaser Designees after the Closing Date
with respect to any and all claims, including any claims arising under
Environmental Laws, relating to the subject matter of this Agreement other than
for fraud, willful misrepresentation or willful deceit and claims relating to
Taxes (which shall be governed solely by the provisions of Article XVII). Under
no circumstances will Seller be responsible for any consequential, incidental,
special, or punitive damages or damages resulting from lost profits or business
opportunities arising out of or resulting from any such claim, except to the
extent Purchaser or Purchaser Designee (or any other indemnified party described
in Sections 16.2 or 16.6) incurs such damages in a Third Party Claim. In
furtherance of the foregoing, Purchaser and the Purchaser Designees hereby
waive, from and after the Closing, to the fullest extent permitted under
applicable law, any and all rights, remedies, claims and causes of action it may
have against Seller relating to the subject matter of this Agreement arising
under or based upon any United States federal, state or local or any foreign
statute, law, Environmental Laws (including, without limitation, any claims for
contribution under CERCLA (the Comprehensive Environmental Response,
Contamination and Liability Act, as amended, 42 U.S.C. ss. 9601 et seq.)),
ordinance, rule or regulation or otherwise except (i) as otherwise provided with
respect to claims relating to Taxes (which shall be governed solely by the
provisions of Article XVII) and (ii) for fraud, willful misrepresentation or
willful deceit.
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(d) Notice of any claim for indemnification under Section 16.5 below must
be given within the applicable survival period set forth in Section 16.1 with
respect to matters set forth in Section 16.2(a)(i).
16.3. INDEMNIFICATION BY PURCHASER:
(a) Purchaser hereby agrees to assume liability for, and defend, indemnify
and hold harmless Seller Group (including successors, assigns and transferees of
Seller Group, if any) and its directors, shareholders, officers, employees,
agents, consultants, representatives, Affiliates, successors and assigns from
and against any and all Losses (except those relating to Taxes, which are
governed solely by Article XVII) which any of them incurs as a result of (i) any
breach of any representation or warranty made by Purchaser in this Agreement;
(ii) Purchaser's failure to pay or satisfy or cause to be paid or satisfied any
of the Assumed Liabilities when due and payable; (iii) any breach or
non-fulfillment of any covenant or agreement of Purchaser contained herein or in
any other document executed and delivered at the Closing; or (iv) except as
otherwise specifically provided in this Agreement, the ownership, operations or
control of the Business after the Closing Date.
(b) Notice of any claim for indemnification under Section 16.5 below must
be given within the applicable survival period set forth in Section 16.1 with
respect to matters set forth in Section 16.3(a)(i).
(c) The amount of any Losses incurred by Seller Group shall be reduced and
increased in accordance with Section 17.1(e).
(d) The indemnity provided in this Section 16.3 shall be the sole and
exclusive remedy of Seller Group after the Closing Date with respect to any and
all claims, including any claims arising under Environmental Laws relating to
the subject matter of this Agreement other than for fraud, willful
misrepresentation or willful deceit and claims relating to Taxes (which shall be
governed solely by the provisions of Article XVII). Under no circumstances will
Purchaser be responsible for any consequential, incidental, special, or punitive
damages or damages resulting from lost profits or business opportunities arising
out of or resulting from any such claim, except to the extent Seller Group (or
any other indemnified party described in Section 16.2) incurs such damages in a
Third Party Claim. In furtherance of the foregoing, Seller Group hereby waives,
from and after the Closing, to the fullest extent permitted under applicable
law, any and all rights, claims and causes of action it may have against Seller
relating to the subject matter of this Agreement arising under or based upon any
United States federal, state or local or any foreign statute, law, Environmental
Laws (including, without limitation, any claims for contribution under ERCLA,
ordinance, rule or regulation or otherwise except (i) as otherwise provided with
respect to claims relating to Taxes (which shall be governed solely by the
provisions of Article XVII) and (ii) for fraud, willful misrepresentation or
willful deceit.
16.4. INDEMNIFICATION THRESHOLD AND DEDUCTIBLE:
(a) Anything to the contrary contained herein notwithstanding, neither
party shall be entitled to any recovery from the other party with respect to any
breach of warranties or representations unless and until the amount of such
Losses suffered, sustained or incurred by the
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asserting party, or to which such party becomes subject, by reason of such
breach, shall exceed $2,000,000 calculated on a cumulative basis (the "Basket
Amount"), and then only with respect to the excess over the Basket Amount;
provided that (i) neither party shall be entitled to indemnification for, and
the Basket Amount shall not take into account, any individual claim for less
than $250,000; and (ii) the aggregate amount payable by either party shall not
exceed $184 million (the "Cap").
(b) The Basket Amount and Cap shall not be applicable to (i) Losses based
on fraud, willful misrepresentation or willful deceit by Seller, (ii) claims
arising under Sections 8.1, 8.2, 8.5(a), or the first sentence of Section 8.6,
(iii) claims for indemnification under Sections 16.3(a)(ii), 16.3(a)(iii) or
16.3(a)(iv) or under Sections 16.2(a)(iii) (other than claims arising from the
breach of a representation or warranty made by Seller in this Agreement, which
are Retained Liabilities , with respect to which both the Basket Amount and the
Cap shall be applicable (except as otherwise provided in clause (ii) above)) or
16.2(a)(iv), (iv) claims relating to Taxes (which shall be governed solely by
the provisions of Article XVII), (v) Environmental Claims (which shall be
governed by Section 16.6), or (vi) claims arising out of the Retained
Liabilities in Section 2.2(f) (for which no cap or basket under Sections 16.4 or
16.6 shall apply).
16.5. INDEMNIFICATION PROCEDURES:
(a) Any party seeking indemnification hereunder (the "Indemnitee") shall
notify the parties liable for such indemnification (each an "Indemnitor") in
writing of any event, omission or occurrence which the Indemnitee has determined
has given or could give rise to Losses which are indemnifiable hereunder. Such
written notice shall specify in reasonable detail the nature and any particulars
of the event, omission or occurrence giving rise to a right of indemnification
and the amount or the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of such claim or
demand, such written notice being hereinafter referred to as a "Notice of
Claim"). In all cases, the Notice of Claim shall be given promptly, in
accordance with the relevant provisions of the Agreement regarding notice;
provided, that the failure of any Indemnitee to give notice as provided in this
Section 16.5 shall not relieve the Indemnitor of its obligations under this
Article XVI except to the extent that the Indemnitor has suffered actual
prejudice thereby. The Indemnitor must satisfy its obligations hereunder, as the
case may be, within 30 days of its receipt of a Notice of Claim; provided,
however, that so long as the Indemnitor is in good faith defending a claim
pursuant to Section 16.5(b) below, its obligation to indemnify the Indemnitee
with respect thereto shall be suspended. To the extent the parties disagree as
to whether any Losses are indemnifiable hereunder, such matters shall be
resolved pursuant to Section 18.11 hereunder; provided, that during the pendency
of any such dispute, the party seeking indemnification may defend the Loss for
which indemnification is sought, and if it is determined that the Loss is one
that is subject to indemnification, the Indemnitor shall be bound by all actions
taken by the party seeking indemnification during the pendency of such dispute.
(b) With respect to any third party claim, demand, suit, action, proceeding
or Loss ("Third Party Claim"), the Indemnitee shall promptly notify the
Indemnitor in writing of the Third Party Claim and such written notice shall
specify the identity of the third party making the claim and shall further
specify in reasonable detail the nature and any particulars of the event,
omission or occurrence giving rise to a right of indemnification and the amount
or the estimated
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amount thereof to the extent then feasible (which estimate shall not be
conclusive of the final amount of such claim or demand). With respect to any
Third Party Claim, demand, suit, action, proceeding or Loss which is the subject
of a Notice of Claim, the Indemnitor shall at its own expense, defend, contest
or otherwise protect against any such claim, demand, suit, actions, proceeding
or Loss with legal counsel of its own choice and the Indemnitee shall have the
right, but not the obligation, to participate in the defense thereof through
legal counsel of its own choice and to assert any and all cross claims or
counterclaims it may have; provided, that the fees and expenses of counsel to
Indemnitee shall be at the Indemnitee's own expense unless (a) the employment of
such counsel and the payment of such fees and expenses both shall have been
specifically authorized by the Indemnitor in connection with the defense of such
Claim, demand, suit, action or proceeding, or (b) the Indemnitee shall have
reasonably concluded and specifically notified the Indemnitor that there may be
specific defenses available to it which are different from or additional to
those available to the Indemnitor, or that such action, suit or proceeding
involves or could have an effect upon matters beyond the scope of the indemnity
agreements contained herein (in which case the Indemnitor, to the extent made
necessary by such different or additional defense or other effects, shall not
have the right to direct the defense of such claim, demand, suit, action or
proceeding on behalf of the Indemnitee). So long as the Indemnitor is defending
in good faith any such third party claim, demand, suit, action, proceeding or
Loss, the Indemnitee shall at all times cooperate, in all reasonable ways with,
make its relevant files and records available for inspection and copying by, and
make its employees available or otherwise render reasonable assistance to, the
Indemnitor. In the event that the Indemnitor elects not to or fails to timely
defend, contest or otherwise protect against any such Third Party Claim, demand,
suit, action, proceeding or Loss, the Indemnitee shall, for the account of the
Indemnitor, defend, contest, assert cross claims or counterclaims, or otherwise
protect against, the same and may make any compromise or settlement thereof,
provided the Indemnitee obtains the prior written consent of the Indemnitor. The
Indemnitor shall make no settlement without Indemnitee's consent of any claims
which Indemnitor has undertaken to defend, unless (i) the Indemnitor fully
indemnifies the Indemnitee for all Losses; (ii) the Indemnitee receives an
unconditional release with respect to the facts underlying the claim; (iii)
there is no finding or admission of violation of law by, or effect on any other
claims that may be made against, the Indemnitee; and (iv) the relief granted in
connection therewith requires no action or inaction on the part of and has no
other material effect on the Indemnitee.
(c) All indemnification payments required to be made under Section 16.2
shall be made directly by the relevant member of the Seller Group to the
Purchaser or the relevant Purchaser Designee (as applicable), and all
indemnification payments required to be made under Section 16.3 shall be made
directly by the Purchaser or the relevant Purchaser Designee (as applicable) to
the relevant member of the Seller Group and such payments shall be treated for
Tax purposes as provided in the second sentence of Section 17.1(d).
(d) All procedures relating to Tax indemnification payments shall be
governed solely by Article XVII.
16.6. ENVIRONMENTAL INDEMNIFICATION:
(a) Indemnification by Seller
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(i) From and after the Closing Date, Seller shall indemnify, hold
harmless and defend Purchaser and Purchaser Designees, and their respective
directors, shareholders, officers, employees, agents, consultants,
representatives and Affiliates, from and against any Losses arising out of
or relating to (A) the presence or release of Hazardous Substances in, on
or beneath any real property formerly owned, leased, operated, or managed
by any member of the Seller Group (in connection with the Business or the
Target Assets) or the Purchased Subsidiaries or any of their respective
predecessors, in each case, to the extent existing on or prior to the
Closing Date, and (B) except as specifically provided in Section
16.2(a)(iii)(A) (with respect to the Retained Liabilities set forth in
Section 2.2(f)), the exposure of any person, prior to the Closing Date, to
any Hazardous Substances that were generated from, or located on, in or
about any property formerly owned, leased, operated or managed by any
member of the Seller Group (in connection with the Business or the Target
Assets) or the Purchased Subsidiaries or any of their respective
predecessors (collectively, "Indemnified Off-Site Environmental Costs").
(ii) From and after the Closing Date, other than with respect to
Indemnified Off-Site Environmental Costs indemnified pursuant to Section
16.6(a)(i), Seller shall indemnify, hold harmless and defend Purchaser and
Purchaser Designees, and their respective directors, shareholders,
officers, employees, agents, consultants, representatives and Affiliates,
from and against any Losses arising out of or relating to (A) the disposal
of, or arranging for the disposal of, any Hazardous Substances to, from or
at any off-site location, that were used, generated or stored by the
Business, the Target Assets, any member of the Seller Group (in connection
with the Business or the Target Assets) or the Purchased Subsidiaries or
any of their respective predecessors, in each case, to the extent disposed,
arranged for the disposal of, used, generated or stored on or prior to the
Closing Date, (B) the violation of any Environmental Laws in connection
with the operation of the Business, the Target Assets or Purchased
Subsidiaries as conducted at any time prior to Closing; (C) except as
specifically provided in Section 16.2(a)(iii)(A) (with respect to the
Retained Liabilities set forth in Section 2.2(f)), the presence or release
of, or exposure to, Hazardous Substances in, on or beneath any Real
Property, in the case of each of (B) and (C), to the extent existing or
occurring, or arising out of circumstances or conditions existing or
occurring, on or prior to the Closing Date; and (D) any breach of any
representation or warranty made by Seller in Section 8.13 of this Agreement
(collectively, "Indemnified Environmental Costs").
(b) Certain Financial Limitations
(i) Purchaser shall be solely responsible for the first $3.25 million
of Indemnified Environmental Costs actually paid.
(ii) Seller shall be responsible for eighty percent (80%) (and
Purchaser or the Purchaser Designees shall be responsible for twenty
percent (20%)) of any Indemnified Environmental Costs actually paid in
excess of $3.25 million.
(iii) Seller shall not be responsible (and Purchaser or the Purchaser
Designees shall be responsible) for any Indemnified Off-Site Environmental
Costs or Indemnified
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Environmental Costs under Section 16.6(a) in excess of $65.75 million. For
the avoidance of doubt, in no event shall Seller's total responsibility for
Indemnified Off-Site Environmental Costs or Indemnified Environmental Costs
exceed $50 million.
(iv) Notwithstanding anything to the contrary in this Agreement,
Seller shall not be obligated to indemnify Purchaser or the Purchaser
Designees with respect to any Environmental Claim (as defined below) for
Indemnified Environmental Costs unless the Indemnified Environmental Costs
resulting from such Environmental Claim exceed $10,000 (the "Threshold").
(v) Any and all payments by Seller pursuant to Section 16.6(a) shall
not count towards the Basket Amount or Cap set forth in Section 16.4.
(c) Additional Terms and Limitations
In addition to any other terms and limitations on Seller's indemnification
obligations under this Section 16.6:
(i) In connection with any Environmental Claim, Purchaser and Seller,
as the case may be, shall act only in a "Commercially Reasonable Manner,"
which shall mean the most reasonable cost methods for investigation,
remediation, removal, corrective action, containment, monitoring and/or
other response action permitted by applicable Environmental Laws determined
from the perspective of a reasonable business person acting (without regard
to the availability of indemnification hereunder) to achieve compliance
with Environmental Laws (it being understood that such Commercially
Reasonable Manner shall include, where appropriate, the use of risk-based
remedies, institutional or engineering controls, or deed restrictions,
provided such controls do not unreasonably interfere with Purchaser's use
of the Real Property for industrial purposes or Purchaser's ability to
conduct the Business in the manner conducted as of the Closing Date).
(ii) Seller shall have no indemnification obligations under this
Section 16.6 to the extent Indemnified Environmental Costs result from or
are the consequence of any action (including any disclosure, report or
other communication from the Purchaser (or its agents) to any governmental
entity or other third party or any Phase II environmental investigations or
sampling, testing or monitoring of the soil, surface water or groundwater
voluntarily performed after the Closing by Purchaser or its agents at the
Real Property) that is not (A) in response to a Third Party Claim, (B)
required by any Environmental Laws, (C) necessary in connection with a
condition first discovered as a result of construction activities at, on or
beneath the Real Property or (D) necessary to respond to a condition at, on
or beneath the Real Property which, if unaddressed, would reasonably be
expected to become the subject of a Third Party Claim (it being understood
in the case of each of (C) and (D) that all Indemnified Environmental Costs
shall be required by applicable Environmental Laws).
(iii) Seller's indemnification obligations under this Section 16.6
shall be reduced to the extent that as a result of any act, omission or
negligence of Purchaser (or
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its agents) after the Closing Date, the amount of Indemnified Off-Site
Environmental Costs or Indemnified Environmental Costs are exacerbated.
(iv) Seller shall have no indemnification obligations under this
Section 16.6 to the extent Indemnified Environmental Costs result, in whole
or in part, from any Change after the Closing Date caused by Purchaser (or
its agents) or any subsequent owner, operator or tenant of the Real
Property. "Change" means (i) sale or closure of all or a portion of the
Real Property or the Business, or (ii) any change in use of the Real
Property from its current use to any nonindustrial or noncommercial use.
(v) Any Environmental Claim subject to indemnification by Seller under
both Section 16.6(a)(ii)(D) and any of the other environmental indemnities
set forth in Section 16.6(a)(i), 16.6(a)(ii)(A), 16.6(a)(ii)(B) or
16.6(a)(ii)(C), shall be indemnified solely in accordance with Section
16.6(a)(i), 16.6(a)(ii)(A), 16.6(a)(ii)(B) or 16.6(a)(ii)(C), as the case
may be.
(d) Environmental Procedures
(i) Except as otherwise provided in Sections 16.6(d)(ii)-(iv), the
indemnification procedures of Sections 16.5(a) and 16.5(b) shall apply to
any party seeking indemnification for Indemnified Off-Site Environmental
Costs or Indemnified Environmental Costs (collectively, an "Environmental
Claim").
(ii) Except as otherwise provided in Section 16.6(d)(iii), Purchaser
shall have the right to control the defense or negotiation (including any
investigatory, response or remedial actions) of any Environmental Claim for
which Purchaser or the Purchaser Designees are entitled to indemnification
pursuant to Section 16.6(a)(ii)(B), (C) or (D), including its resolution,
compromise or settlement, with counsel and environmental consultant
selected, if any, by Purchaser reasonably acceptable to Seller. No
resolution, compromise or settlement in respect of such Environmental Claim
may be reached by Purchaser without Seller's prior written consent (which
consent shall not be unreasonably withheld, conditioned or delayed). In the
event Purchaser has the right, but elects not to, control the defense of
any such Environmental Claim, Seller shall control the defense of any such
Environmental Claim, including its resolution, compromise or settlement,
with counsel and consultant selected by Purchaser reasonably acceptable to
Purchaser, and no resolution, compromise or settlement in respect of such
Environmental Claim may be reached by Seller without Purchaser's prior
written consent (which consent shall not be unreasonably withheld,
conditioned or delayed).
(iii) Seller shall control the defense or negotiation (including any
investigatory, response or remedial actions) of any Environmental Claim for
which Purchaser or the Purchaser Designees are entitled to indemnification
pursuant to Section 16.6(a)(i), 16.6(a)(ii)(A) or 16.6(a)(ii)(D) (to the
extent related to Section 16.6(a)(i) or Section 16.6(a)(ii)(A)) and any
other Environmental Claim under Section 16.6(a) that is a Third-Party Claim
by a non-governmental party, including its final resolution, with counsel
and environmental consultant, if any, selected by Seller reasonably
acceptable to Purchaser. No resolution, compromise or settlement in respect
of such Environmental Claim may be
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reached by Seller without Purchaser's prior written consent (which consent
shall not be unreasonably withheld, conditioned or delayed).
(iv) Purchaser or Seller, at their sole cost, as the case may be, with
respect to any matter managed and controlled by the other, shall have the
right to (i) participate in any meetings or material negotiations with any
third party (excluding counsel, consultants or other experts retained by
the controlling party) with respect to any Environmental Claim and shall be
provided with reasonable advance notice of the same; and (ii) review in
advance and provide comments on any documents proposed to be submitted to
governmental authorities or other third parties.
ARTICLE XVII.
Tax Matters
17.1. TAX INDEMNITIES:
(a) Tax Indemnification by Seller. From and after the Closing Date, without
duplication, Seller shall indemnify, hold harmless and defend the Purchased
Subsidiaries, Purchaser and its Affiliates, officers, directors, employees,
agents, consultants, representatives and successors, from and against Retained
Tax Liabilities and any and all Taxes (i) imposed on the Purchased Subsidiaries
or relating to the Business or the Target Assets with respect to Pre-Closing Tax
Periods, (ii) imposed on any Purchased Subsidiary (x) with respect to a
Pre-Closing Tax Period by reason of such Purchased Subsidiary being severally
liable for any Taxes of any Tax Affiliate pursuant to U.S. Treasury Regulations
Section 1.1502-6 (or any analogous provision of applicable U.S. state or local
or non-U.S. Tax Law), (y) with respect to any Straddle Period by reason of such
Purchased Subsidiary being severally liable pursuant to U.S. Treasury
Regulations Section 1.1502-6 (or any analogous provision of applicable U.S.
state or local or non-U.S. Tax Law) for any Taxes of any Tax Affiliate that is
included in a Consolidated Group that includes Seller or any Affiliate of
Seller, or (z) as a transferee or successor, by contract or otherwise, as a
result of any acquisition, disposition, contribution, distribution or similar
transaction that occurred prior to the Closing, (iii) imposed upon or payable by
Purchaser, any of Purchaser's Affiliates or any Purchased Subsidiary by reason
of or attributable to the breach by Seller of any representation, warranty,
covenant or agreement relating to Taxes under this Agreement (in the case of any
representation or warranty, without regard to materiality or Material Adverse
Effect qualifications contained therein), (iv) imposed on or payable by
Purchaser, any of Purchaser's Affiliates or any Purchased Subsidiary resulting
from or arising out of the Restructuring Transactions, (v) imposed on Worcestor
Controls Licensco Inc. with respect to Pre-Closing Tax Periods by reason of an
election under Section 338(h)(10) of the Code (or any actual or deemed election
under applicable U.S. state or local Tax Law that is analogous or comparable to
Section 338(h)(10) of the Code) with respect to Worcestor Controls Licensco
Inc., (vi) Transfer Taxes for which Seller is responsible pursuant to Section
17.7, (vii) imposed on a U.K. Purchased
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Subsidiary with respect to a Post-Closing Tax Period as a result of the
requirement under applicable Tax Law that such U.K. Purchased Subsidiary include
an item of income, profits or gains in taxable income for such Post-Closing Tax
Period if under applicable Tax Law such item of income, profits or gain is
treated as earned, accrued or received or is deemed to have been earned, accrued
or received, in each case by such U.K. Purchased Subsidiary during any
Pre-Closing Tax Period, (viii) imposed on a U.K. Purchased Subsidiary with
respect to any Pre-Closing Tax Period as a result of such U.K. Purchased
Subsidiary having secondary liability for a Tax liability of Seller or any
present or former Affiliate of Seller, other than any U.K. Purchased Subsidiary
(including, without limitation, any Tax imposed on a U.K. Purchased Subsidiary
with respect to any Pre-Closing Tax Period by reason of the failure of Seller or
any such Affiliate of Seller to pay such Tax at any time) if such secondary
liability arises by operation of applicable Tax Law, regardless of whether such
secondary liability arises as a result of such U.K. Subsidiary being included in
a Tax Return filed by a Consolidated Group with respect to a Pre-Closing Tax
Period that includes Seller or any such Affiliate of Seller or a contractual
arrangement with Seller or any such Affiliate of Seller, or (ix) any Deemed
Taxation Liability of a U.K. Purchased Subsidiary, except, in each case, to the
extent Purchaser is otherwise liable for such Taxes under this Article XVII (the
Taxes described in this Section 17.1(a), collectively, "Seller Indemnified
Taxes"); provided, however, that Seller shall not have any indemnification
obligations with respect to, and shall not otherwise be responsible for, any
Taxes with respect to Post-Closing Tax Periods (including any Taxes allocated to
Post-Closing Tax Periods pursuant to Section 17.6) arising out of or resulting
from any reduction in any losses, credits, Reliefs, allowances or other similar
Tax attributes of, or allocated under applicable Tax Law to, the Purchased
Subsidiaries arising in or attributable to Pre-Closing Tax Periods (including
such losses, credits, Reliefs, allowances or other similar Tax attributes which
are allocated to Pre-Closing Tax Periods pursuant to Section 17.6).
(b) Tax Indemnification by Purchaser. From and after the Closing Date,
Purchaser shall indemnify, hold harmless and defend Seller Group and their
Affiliates, officers, directors, employees, agents, consultants, representatives
and successors, from and against any and all Taxes (including, for avoidance of
doubt, such Taxes arising out of or resulting from any reduction in any Seller's
Attributes by reason of or attributable to the breach by Purchaser of any
covenant or agreement relating to Taxes under this Agreement) (i) imposed on the
Purchased Subsidiaries or relating to the Business or the Target Assets with
respect to Post-Closing Tax Periods, (ii) arising out of or payable by reason of
any election under Code Section 338 (or by reason of any actual or deemed
election under applicable U.S. state or local or non-U.S. Tax Law that is
analogous or comparable to Code Section 338) made by or at the direction of
Purchaser or any Affiliate of Purchaser (including any Purchased Subsidiary
after the Closing) with respect to any Purchased Subsidiary that is not made in
connection with an election under Section 338(h)(10) (or any actual or deemed
election under applicable U.S. state or local Tax Law that is analogous or
comparable to Code Section 338(h)(10)) with respect to such Purchased
Subsidiary, (iii) arising out of or payable by reason of any election under
Section 301.7701-3 of the U.S. Treasury Regulations (or by reason of any actual
or deemed election under applicable U.S. state or local or non-U.S. Tax Law that
is analogous or comparable to Section 301.7701-3 of the U.S. Treasury
Regulations) with respect to any Purchased Subsidiary made after the Closing by
or at the direction of Purchaser or any Affiliate of Purchaser (including any
Purchased Subsidiary after the Closing), (iv) imposed on or payable by Seller or
any of its Affiliates by reason of or attributable to the breach by Purchaser of
any covenant or agreement relating to Taxes under this Agreement, (v) arising
out of or resulting from any transaction, omission or action carried out or
effected by or at the direction of Purchaser or any Affiliate of Purchaser
involving any of the Purchased Subsidiaries or the Target Assets or the Business
that occurs (or is deemed to occur) on the Closing Date and that is not in the
ordinary course of business, (vi) imposed on or with respect to Seller, any
Affiliate of Seller, any Purchased Subsidiary, the Business or the Target Assets
with respect to Pre-Closing
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Tax Periods by reason of or attributable to (x) any failure or omission on the
part of Purchaser or any Affiliate of Purchaser (including any Purchased
Subsidiary) after the Closing to make any election or claim or take any other
action in accordance with Section 17.5(c) or (y) the making, amending or
revoking of any Tax elections or claims by Purchaser, any Affiliate of
Purchaser, or any Purchased Subsidiary after the Closing other than in
accordance with Section 17.5(d), (vii) payable by Seller, any Affiliate of
Seller or any Purchased Subsidiary arising out of or resulting from the
Multi-Stage Closing, or (viii) Transfer Taxes for which Purchaser is responsible
pursuant to Section 17.7 (the Taxes described in this Section 17.1(b),
collectively, "Purchaser Indemnified Taxes").
(c) The indemnification obligations provided pursuant to this Section 17.1
and the representations and warranties set forth in Section 8.15 of this
Agreement shall survive the Closing until thirty (30) calendar days after the
expiration of the applicable statute of limitations (giving effect to any
waiver, mitigation or extension of such statute of limitations).
(d) All payments required to be made under Section 17.1(a) and the other
provisions of this Article XVII shall be made directly by the relevant member of
the Seller Group to the Purchaser or the relevant Purchaser Designee (as
applicable), and all payments required to be made under Section 17.1(b) and the
other provisions of this Article XVII shall be made directly by the Purchaser or
the relevant Purchaser Designee (as applicable) to the relevant member of the
Seller Group, in each case as soon as practicable. Purchaser and Seller shall
treat, and shall cause their respective Affiliates (including the Purchased
Subsidiaries) to treat, all payments made under this Section 17.1 or under any
other indemnity or payment provisions contained in this Agreement as adjustments
to the purchase price for all Tax purposes, and Purchaser and Seller agree that
such adjustments shall be allocated to the relevant Purchased Assets in
accordance with, and subject to, the provisions of Section 3.3 and 17.2. The
provisions set forth in Schedule 17.1(d) shall apply if Seller is required to
make a payment under Section 17.1(a) with respect to any U.K. Purchased
Subsidiary.
(e) Without in any way limiting Seller's or Purchaser's obligation to make
indemnification payments under this Agreement, if any Loss or Tax with respect
to which any claim for indemnification is made under this Agreement, including
for this purpose a request for payment of a Tax by Seller under Section
17.4(a)(ii) or Section 17.4(b) (an "Indemnity Claim") gives rise to a Tax
Benefit or Tax Cost to the person making the Indemnity Claim or any Affiliate of
such person (such person or Affiliate, the "Claimant"), then the amount of the
related indemnity payment shall be reduced by the amount of such Tax Benefit or
shall be increased by the amount of such Tax Cost; provided, however, that if
the party obligated to make such indemnity payment under this Agreement (Seller
or Purchaser as such, the "Indemnifying Party") receives evidence reasonably
demonstrating that such Claimant has not actually previously used, and will not
be able to actually use in the taxable period in which such indemnity payment is
to be made, all or a portion of such Tax Benefit, then (i) the amount of the
such indemnity payment shall be reduced only by the portion of such Tax Benefit
(if any) that such Claimant has previously actually used or will be able to
actually use in such taxable period and (ii) the party entitled to receive such
indemnity payment under this Agreement (Purchaser or Seller as such, the
"Indemnified Party") will be obligated to pay to such Indemnifying Party the
amount of any unused portion of such Tax Benefit at such times or times as and
to the extent that such Claimant actually uses such portion. For purposes of
this Agreement, a "Tax Benefit"
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means the amount (determined under this Section 17.1(e)) by which the Tax
liability or Tax sharing liability of a Claimant for a taxable period is reduced
(including, without limitation, by deduction, reduction of income upon a sale,
disposition or other similar transaction as a result of increased Tax basis,
receipt of a refund of Taxes, use of a credit of Taxes or increase in the amount
of its losses, Reliefs, allowances or other similar Tax attributes) plus any
related interest received from the relevant Tax authority, as a result of
incurring or suffering any such Loss or Tax, or for purposes of Section
17.4(a)(ii) or Section 17.4(b), arising from payment or accrual of any Taxes
owed by Seller that are referred to therein. For purposes of this Agreement, a
"Tax Cost" means the amount (determined under this Section 17.1(e)) by which the
Tax liability of a Claimant for any taxable period is increased as a result of
the Claimant's receipt or accrual of an indemnity payment being treated as an
item of income for applicable Tax purposes, reduced by any Tax Benefit arising
as a result of a related deduction or credit of Tax; provided, however, that any
Tax that is withheld or deducted from an indemnity payment will not be treated
as a Tax Cost to the extent that such Tax would not have been required to be so
withheld or deducted but for the Claimant's failure to comply with any
certification, identification, information, documentation or other reporting
requirement or to make and deliver any declaration or other similar claim which
the Claimant is legally able to make and deliver, if (A) such compliance or the
making and delivering of such declaration or similar claim, as the case may be,
is required or imposed by applicable Tax Law in order to make any claim for
exemption from, or reduction in the rate of, the withholding or deduction of
such Tax, and (B) the Indemnifying Party has given at least 30 calendar days
prior written notice to the Claimant that such compliance or the making and
delivering of such declaration or similar claim, as the case may be, is so
required or imposed. The amount of any Tax Benefit or Tax Cost for a Claimant
for a taxable period shall be calculated by comparing (x) the Tax liability or
Tax sharing liability of such Claimant computed without regard to any losses,
deductions, credits, refunds or other Tax items attributable to such Loss or Tax
and the Claimant's receipt or accrual of the related indemnity payment, to (y)
the Tax liability or Tax sharing liability of such Claimant computed taking into
account any losses, deductions, credits, refunds or other Tax items attributable
to such Loss or Tax and the Claimant's receipt or accrual of the related
indemnity payment. In the event that there shall be a Determination or
settlement disallowing all or a portion of any losses, credits, deductions,
refunds or other Tax items attributable to such Loss or Tax or requiring that
the receipt or accrual of an indemnity payment be treated as income recognized
by the Claimant, the amount of the related Tax Benefit or Tax Cost shall be
recalculated in accordance with the terms of this Section 17.1(e) and payments
shall be made between the Indemnifying Party and the Indemnified Party
reflecting such Determination within 10 calendar days of such Determination. The
provisions of Schedule 17.1(e) shall apply with respect to a U.K. Purchased
Subsidiary.
(f) The provisions contained in this Article XVII shall be the exclusive
provisions of this Agreement governing indemnification for Taxes and the
procedures relating thereto and any other matters relating to Taxes covered in
such provisions, and the indemnity provided in Section 17.1 shall be the sole
and exclusive remedy of Purchaser and the Purchaser Designees, on the one hand,
and the Seller Group on the other hand, after the Closing Date with respect to
all claims relating to Taxes other than for fraud, willful misrepresentation or
willful deceit. Under no circumstances will Purchaser or Seller be responsible
for any consequential, incidental, special, or punitive damages or damages
resulting from lost profits or business opportunities arising out of or
resulting from any such claim. In furtherance of the foregoing, Purchaser, the
Purchaser Designees and the Seller Group hereby waive, from and after the
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Closing, to the fullest extent permitted under applicable law, any and all
rights, remedies, claims and causes of action it may have against the other
party relating to the subject matter of this Article XVII arising under or based
upon any United States federal, state or local or any foreign statute, law,
ordinance, rule or regulation or otherwise except for fraud, willful
misrepresentation or willful deceit.
(g) For avoidance of doubt, any Taxes (i) imposed on Worcestor Controls
Licensco Inc. by reason of an election under Section 338(h)(10) of the Code (or
any actual or deemed election under applicable U.S. state or local Tax Law that
is analogous or comparable to Section 338(h)(10) of the Code) made jointly by
Purchaser and Seller with respect to Worcestor Controls Licensco Inc. or (ii)
arising out of the purchase and sale under this Agreement of the interest in
each U.S. LLC, shall be borne by Seller, shall be treated under this Agreement
as arising in a Pre-Closing Tax Period and shall constitute an obligation of
Seller under Section 17.1(a).
17.2. SECTION 338 ELECTIONS; ALLOCATIONS OF PURCHASE PRICE:
(a) With respect to the purchase and sale of the shares of capital stock of
Worcestor Controls Licensco Inc. ("WCL") at the Purchaser's request, Seller
shall join with Purchaser in making a timely election under Section 338(h)(10)
of the Code and U.S. Treasury Regulations Section 1.338(h)(10)-1 and, at the
Purchaser's request, any corresponding elections with any U.S. state or local
Tax jurisdiction in which WCL has filed Income Tax Returns (collectively, the
"Section 338(h)(10) Elections"). As soon as practicable after the Closing,
Purchaser shall provide to Seller for Seller's review and approval, and
execution upon such approval, the Internal Revenue Service Forms 8023 with
respect to such Section 338(h)(10) Election, including all additional data and
materials required to be attached to such Form 8023 pursuant to U.S. Treasury
Regulations Section 1.338(h)(10)-1 (and, as applicable, analogous forms required
pursuant to any corresponding provisions of applicable U.S. state or local Tax
Law). Purchaser shall be responsible for filing all such Form 8023 (and any such
analogous U.S. state or local forms). In addition, Seller and Purchaser shall
reasonably cooperate with each other to take all actions reasonably necessary
and appropriate (including timely preparation and filing of such additional
forms, Tax Returns, elections, schedules and other documents separately or
jointly) as may be required to effect and preserve timely and effective Section
338(h)(10) Elections in accordance with Code Section 338(h)(10), and the
regulations promulgated thereunder, and any corresponding provisions of
applicable U.S. state or local Tax Law. If Section 338 Elections are made with
respect to WCL, Seller and Purchaser shall report the purchase and sale of the
shares of capital stock of WCL in a manner consistent with the Section
338(h)(10) Elections and shall not take (or cause or permit their respective
Affiliates to take) any position inconsistent therewith in any Tax Return or Tax
Matter, except as required pursuant to a "determination" within the meaning of
Code Section 1313(a) (or a comparable provision of state, local or non-U.S. Tax
Law) (a "Determination"), without the prior written consent of the other party.
Without Seller's prior written consent (which consent shall not be unreasonably
withheld, delayed or conditioned), Purchaser will not make, or cause or permit
any of its Affiliates (including any Purchased Subsidiary) to make, any
elections under Code Section 338 (or any corresponding or analogous provision of
U.S. state, local or non-U.S. Tax Law) with respect to Worcester Do Brazil Ltda,
Worcester Controls France SARL or Canada Worchestor Controls Ltd.
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(b) In the event that Section 338(h)(10) Elections are made with respect to
WCL, for purposes of making such Section 338(h)(10) Elections, Seller and
Purchaser shall together and in good faith agree within 30 calendar days after
the final determination of the adjustments to the Purchase Price under Article
IV on the computation of the "aggregate deemed sales price" (as such term is
defined in U.S. Treasury Regulations section 1.338-4) ("ADSP") with respect to
WCL ("ADSP Computation") and the allocation of such ADSP among the assets of WCL
(the "ADSP Allocation"), in each case, in accordance with the U.S. Treasury
Regulations promulgated under Code Section 338(h)(10) (and any comparable
provisions of U.S. state or local Tax Law, as applicable) and in a manner
consistent with the Final Allocation.
(c) Seller and Purchaser shall together and in good faith agree on any
adjustments to the ADSP Computation and the ADSP Allocation that are required by
reason of any indemnification payments or other payments made pursuant to this
Agreement that are attributable to WCL within 15 calendar days of such
adjustments being finally determined or such payments being made pursuant to
this Agreement.
(d) If Seller and Purchaser are unable to agree with respect to the ADSP
Computation or the ADSP Allocation or any adjustments thereto within the
relevant time period specified in this Section 17.2, the items in dispute shall
be referred to a single Independent Firm, mutually selected, and jointly
engaged, by the parties, no later than ten calendar days after the end of such
relevant time period for resolution by the Independent Firm. The Independent
Firm shall be instructed to notify Seller and Purchaser of its resolution of the
disputed items within fifteen Business Days of such referral and that its
resolution of the disputed items must be consistent with the Final Allocation
and the portion of the ADSP Computation or the ADSP Allocation, as the case may
be, to which Seller and Purchaser have agreed. The Independent Firm's resolution
of the disputed items shall be final and binding on Seller and Purchaser and
their respective Affiliates. Expenses and fees of the Independent Firm incurred
in connection with such dispute shall be borne by Seller and Purchaser in
inverse proportion as they may prevail on the disputed items resolved by the
Independent Firm, which proportionate allocations shall also be determined by
the Independent Firm at the time the determination of the Independent Firm is
rendered on the disputed items.
(e) The ADSP Computation and the ADSP Allocation and any adjustments to the
ADSP Computation or the ADSP Allocation as determined pursuant to this Section
17.2 shall be final and binding on Seller and Purchaser (and their respective
Affiliates, including the Purchased Subsidiaries) for all Tax purposes
(including, without limitation, preparation and filing of Tax Returns, subject
to adjustment to reflect Seller's selling expenses as a reduction of sales
proceeds and Purchaser's acquisition expenses as an adjustment to purchase
price), and Seller and Purchaser shall not take (or cause or permit any of their
respective Affiliates, including the Purchased Subsidiaries, to take) any
position inconsistent with the ADSP Computation and the ADSP Allocation and any
adjustments to the ADSP Computation or the ADSP Allocation in any Tax Return or
Tax Matter, except to the extent required pursuant to a Determination.
17.3. POST CLOSING ACTIONS WHICH AFFECT SELLER'S LIABILITY FOR TAXES: During the
period beginning on the Closing Date and ending on March 31, 2003, Purchaser
shall not cause or permit any of Worcester Do Brazil Ltda, Worcester Controls
France
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SARL or Canada Worcester Controls Limited to make any distribution
(including a deemed distribution) to shareholders in excess of current earnings
and profits (as computed for U.S. federal income tax purposes) derived during
the period beginning on the day following the Closing Date and ending on March
31, 2003.
17.4. TAX RETURNS:
(a) Tax Returns for Tax Periods Ending on or Before the Closing Date.
(i) Except with respect to U.K. Purchased Subsidiaries to which the
provisions of Schedule 17.4(f) shall apply, at the request of Seller,
Purchaser shall cause each Purchased Subsidiary to consent to join, and
join, for all Pre-Closing Tax Periods for which such Purchased Subsidiary
is required or eligible to do so, in any consolidated, combined, unitary,
affiliated, aggregate or similar U.S. or non-U.S. federal, provincial,
state or local or other non-U.S. Income Tax Returns which include Seller or
any Affiliate of Seller other than any of the Purchased Subsidiaries.
Seller shall cause to be prepared and timely filed all such Income Tax
Returns. Purchaser will provide or cause to be provided to Seller, no later
than 60 calendar days after receipt of a written request from Seller, Tax
information pertaining to such Purchased Subsidiary for inclusion in such
Income Tax Returns in accordance with past practice and custom relating to
such Purchased Subsidiary. Purchaser shall not take (or cause or permit any
of its Affiliates, including any Purchased Subsidiary, to take) any
position inconsistent with such Purchased Subsidiary's being a member of
the applicable consolidated, combined, unitary, affiliated or similar group
for all such Pre-Closing Tax Periods unless otherwise required by a
Determination. Seller shall cause to be timely paid and shall be
responsible for all Income Taxes to which such Income Tax Returns relate
for all taxable periods covered by such Income Tax Returns. Promptly after
the filing of such Income Tax Returns, Seller shall provide to Purchaser
copies of the portions of such Income Tax Returns that relate solely to the
Purchased Subsidiaries.
(ii) Except with respect to U.K. Purchased Subsidiaries to which the
provisions of Schedule 17.4(f) shall apply, Seller shall timely prepare or
cause to be timely prepared, and Purchaser shall timely file or cause to be
timely filed, all Tax Returns (other than those covered by Section
17.4(a)(i)) relating to Purchased Subsidiaries or the Target Assets for all
taxable periods ending on or prior to the Closing Date that are required to
be filed after the Closing Date, provided, however, that Purchaser shall
timely prepare or cause to be timely prepared such Tax Returns as agreed
upon by Seller and Purchaser prior to the Closing Date and Seller shall
reimburse Purchaser for its reasonable costs and expenses incurred in the
preparation of such Tax Returns. Purchaser will provide or cause to be
provided to Seller, no later than 60 calendar days after receipt of a
written request from Seller, Tax information pertaining to such Purchased
Subsidiaries and the Target Assets for inclusion in such Tax Returns in
accordance with past practice and custom relating to such Purchased
Subsidiaries and the Target Assets. All Tax Returns described in this
Section 17.4(a)(ii) shall be prepared in a manner consistent with the prior
practice of the Purchased Subsidiaries, except as otherwise required by
applicable Tax Law. Seller shall provide to Purchaser for Purchaser's
comments each Tax Return described in this Section 17.4(a)(ii) at least 30
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calendar days before the due date (including extensions) for the filing of
such Tax Return and Purchaser shall provide comments on such Tax Return no
later than 15 calendar days after its receipt of such Tax Return. Seller
shall provide to Purchaser for Purchaser's signature each Tax Return
described in this Section 17.4(a)(ii) at least five (5) Business Days
before the due date (including extensions) for the filing of such Tax
Return, and Purchaser shall execute and timely file each such Tax Return as
prepared or approved by Seller, provided that there is a reasonable basis
(within the meaning of U.S. Treasury Regulations section 1.6662-3(b)(3) or
analogous or comparable provisions of U.S. state or local or non-U.S. Tax
Law) in applicable Tax Law for the positions that Seller determines shall
be taken in such Tax Return. Purchaser shall timely pay or cause to be
timely paid all Taxes of the Purchased Subsidiaries or relating to the
Target Assets to which such Tax Returns relate, and Seller shall pay to
Purchaser, at least two calendar days prior to the date such Taxes are due
to the applicable Tax authority, the amount of such Taxes owed by Seller
pursuant to Section 17.1(a) with respect to the taxable period covered by
such Tax Returns (taking into account the amounts of any estimated Taxes or
prepaid Taxes paid on or before the Closing Date and any amount of such
Taxes owed by Purchaser pursuant to Section 17.1(b)).
(b) Straddle Period Tax Returns. Purchaser shall prepare or cause to be
prepared and timely file or cause to be timely filed all Tax Returns of the
Purchased Subsidiaries for Straddle Periods. All such Tax Returns shall be
prepared in a manner consistent with the prior practice of the Purchased
Subsidiaries, except as otherwise required by applicable Tax Law and except
that, to the extent permitted by applicable Tax Law, Purchaser may cause the
Purchased Subsidiaries to change the date on which their taxable years end to a
date prior to March 31, 2003 (and, to the extent the taxable year of any of
Worcester Do Brazil Ltda, Worcester Controls France SARL or Canada Worcester
Controls Limited is so changed, Section 17.3 shall be applied by substituting
such earlier date for "March 31, 2003" in each place "March 31, 2003" appears in
Section 17.3). Purchaser shall provide to Seller for Seller's review and
approval each such Tax Return described in the preceding sentence at least 30
calendar days before the due date (including extensions) for the filing of such
Tax Return. Purchaser shall timely pay or cause to be timely paid all Taxes of
the Purchased Subsidiaries to which such Tax Returns relate for all taxable
periods covered by such Tax Returns. Seller shall pay to Purchaser, at least two
calendar days prior to the date such Taxes are due to the applicable Tax
authority, the amount of such Taxes owed by Seller pursuant to Section 17.1(a)
with respect to the taxable period covered by such Tax Returns determined in
accordance with Section 17.6 and taking into account the amounts of any
estimated Taxes or prepaid Taxes paid on or before the Closing Date and the
amount of such Taxes owed by Purchaser pursuant to Section 17.1(b) with respect
to the taxable period covered by such Tax Returns. Seller shall pay or cause to
be paid to Purchaser an amount equal to the product of (i) the out-of-pocket
professional fees that Purchaser or its Affiliates reasonably and properly incur
to prepare such Tax Returns and (ii) a fraction, the numerator of which is the
number of calendar days in the portion of the Straddle Period ending on the
Closing Date and the denominator of which is 365, no later than 10 Business Days
after Seller's receipt of invoices and other materials describing in reasonable
detail the nature, amount and calculation of such fees.
(c) Value Added Taxes.
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(i) Notwithstanding Section 17.4(b) or Section 17.7, value added Taxes
imposed by the United Kingdom and South Africa and Tax Returns of or
relating to the Purchased Subsidiaries and the Business with respect to
such value added Taxes will be governed by the provisions set forth in this
Section 17.4(c) and Schedule 17.4(c).
(ii) Purchaser and Seller intend that the provisions of Section 49(1)
VATA and Article 5 of the Value Added Tax (Special Provisions) Order 1995
shall apply to the transfer of the Business and Target Assets located in
the United Kingdom ("UK Business and Assets") pursuant to this Agreement.
Seller and Purchaser will use their best efforts (and will cause their
respective Affiliates to use their best efforts) to secure that pursuant to
the said Section 49(1) VATA and Article 5, the sale of the U.K. Business
and Assets pursuant to this Agreement is not treated as either a supply of
goods or a supply of services for the purposes of value added tax imposed
by the United Kingdom ("U.K. VAT"). Purchaser warrants that either it or
its applicable Affiliate is, or will immediately after the Closing become,
a taxable person registered for the purposes of U.K. VAT and that it or its
applicable Affiliate is buying for itself and as agent of the Purchaser the
Business and Target Assets located in the United Kingdom ("UK Business and
Assets") with the intention of carrying on the same kind of business as
that carried on by the Seller or its applicable Affiliate in relation to
the UK Business and Assets. Seller will procure that, as soon as possible
after the Closing, Seller or its applicable Affiliates will deliver to
Purchaser (or, at the direction of Purchaser, to Purchaser's applicable
Affiliates) all the U.K. VAT records relating to the UK Business and Assets
that are required under section 49(1)(b) VATA to be preserved by Purchaser
or its applicable Affiliates in place of Seller or its applicable
Affiliates, and that Seller will not make any request to HM Customs &
Excise for those records to be retained by Seller or any of its Affiliates.
Purchaser will preserve such U.K. VAT records for a period of not less than
6 years from the Closing (or such longer period as may be required by
applicable law). Upon being given reasonable notice by Seller, Purchaser
will make (and will cause its applicable Affiliates to make) such U.K. VAT
records available to the Seller for inspection or photocopying. Prior to
the Closing, Seller shall provide written notice to Purchaser in the event
that it or any relevant associate of it (within the meaning of paragraph 3
schedule 10 VATA) has or will prior to Closing make any election under
paragraph 2 of the said schedule in respect of any of the Target Assets
located in the United Kingdom or in the event that any of the Target Assets
located in the United Kingdom is a new or incomplete building or civil
engineering work for the purpose of item 1(a) of group 1 schedule 9 VATA.
(iii) In respect of the treatment of value added tax imposed by South
Africa ("SA VAT") as regards the transfer of the Business and Target Assets
located in South Africa, Purchaser and Seller agree that (1) the part of
the Business carried on by Seller using the Target Assets located in South
Africa (the "enterprise") is an enterprise capable of separate operation
and is being sold as a going concern; (2) the aforesaid enterprise did
constitute an income earning activity on the date hereof and will
constitute an income earning activity on the Closing Date; (3) all of the
assets necessary to carry on the enterprise are being disposed of by Seller
to Purchaser in terms of this Agreement; (4) the sale of the enterprise
contained within this Agreement falls within the ambit of section 11(l)(e)
of the Value Added Tax Act, No. 89 of 1991 ("VAT Act"), and therefore SA
VAT is payable thereon at the rate of 0%; (5) Seller will provide Purchaser
with a tax
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invoice as contemplated by section 20(l) of the VAT Act and (6) each of
Purchaser and Seller respectively warrant to the other that they or
their relevant Affiliates (as applicable) are on the date hereof, and will
be on the Closing Date, registered as vendors in terms of the Value Added
Tax Act, No. 89 of 1991.
(iv) (1) Subject to Section 17.8(d), if, notwithstanding the
provisions above, HM Customs and Excise determine that any U.K. VAT shall
be payable on the sale of the UK Business and Assets hereunder (the "VAT
Amount"), Purchaser or the relevant Business Purchaser, as the case may be,
shall account and pay to Seller 50% of the VAT Amount on the date of the
payment of such VAT Amount to HM Customs & Excise by Seller or, if later,
within five Business Days after the date of delivery by Seller to Purchaser
of a valid U.K. VAT invoice in an amount equal to the amount of such VAT
Amount. Purchaser or the relevant Business Purchaser, as the case may be,
shall account and pay to Seller for the balance of such VAT Amount in
accordance with paragraph (2) below.
(2) Subject to Seller accounting for the full amount of such VAT Amount
by the due date for payment, Purchaser or the relevant Business
Purchaser, as the case may be, shall pay to Seller the balance of such
VAT Amount (or such part of it as is received or set off), within five
Business Days of the Purchaser or the relevant Business Purchaser, as
the case may be:
(a) actually receiving a VAT repayment from HM Customs & Excise in respect
of the balance of such VAT Amount (or part of it); or
(b) actually receiving the benefit of setting off the balance of such VAT
Amount (or part of it) against its liability to account to HM Customs & Excise
for its output tax; provided always that any portion of such VAT Amount that is
not ultimately recoverable or creditable by Purchaser or any Affiliate of
Purchaser shall be borne 50% by Purchaser or the relevant Business Purchaser, as
the case may be, and 50% by Seller.
(3) Any penalty, surcharge, fine or interest accrued by Seller for any late
payment of such VAT Amount shall be borne by Seller if and to the extent
such penalty, surcharge, fine or interest arises from any action taken or
not taken by Seller, and shall be borne by Purchaser if and to the extent
such penalty, surcharge, fine or interest arises from any action taken or
not taken by Purchaser, as the case may be.
(4) Purchaser shall and shall cause its Affiliates to use all reasonable
efforts to obtain a recovery or credit of such VAT Amount and shall refrain
to the extent it is reasonably practicable to do so, from any action that
would prejudice such recovery or credit without the prior written consent
of Seller (which consent shall not be unreasonably withheld, delayed or
conditioned, as the case may be).
(5) Purchaser shall promptly provide to Seller Tax Returns and other
records reasonably necessary for Seller to verify the timing and amount of
such recoveries or credits and if, applicable, written evidence reasonably
acceptable to Seller demonstrating
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that all or any portion of such VAT Amount is not recoverable or creditable
by Purchaser or any Affiliate of Purchaser.
(6) If, following a payment by Purchaser to Seller of an amount in respect
of such VAT Amount hereunder, HM Customs & Excise or any tribunal or court
finally determine that U.K. VAT was not properly chargeable on the sale of
the UK Business and Assets (or any of them), Seller shall forthwith on such
determination issue to Purchaser an appropriate VAT credit note and shall
repay to Purchaser an amount equal to such amount or a credit against tax
due to HM Customs & Excise to the date of the payment to Purchaser
hereunder.
(v) If and to the extent applicable, the provisions of clause (iv) of this
Section 17.4(c) shall apply mutatis mutandis to any value added tax imposed by
South Africa with respect to the sale hereunder of the Target Assets and the
Business located in South Africa.
(d) Overpayments of Taxes by Seller. Seller and Purchaser agree that if
Seller and its Affiliates (including the Purchased Subsidiaries prior to the
Closing) pay (whether to a taxing authority or to Purchaser before or after the
Closing) an amount of Taxes of or relating to the Purchased Subsidiaries, the
Business or the Target Assets with respect to Straddle Periods that exceeds the
total amount of such Taxes owed by Seller pursuant to Section 17.1(a) determined
in accordance with Section 17.6 (for avoidance of doubt, reduced by the amount
of refunds or credits of such Taxes that are paid by Purchaser to Seller
pursuant to Section 17.5(a)(ii)), then Purchaser shall pay to Seller the amount
of such excess no later than ten (10) Business Days after Purchaser's receipt
from Seller of a calculation of such excess, along with Tax Returns, Tax
receipts and other relevant materials that support in reasonable detail such
calculation.
(e) Restructuring Items. Purchaser hereby agrees that Seller shall have the
exclusive right to determine the manner in which each Restructuring Item will be
treated and reported on any Tax Return for a Pre-Closing Tax Period or a
Straddle Period or in any Tax Matter, provided that there is a reasonable basis
(within the meaning of U.S. Treasury Regulations Section 1.6662-3(b)(3) or
analogous or comparable provisions of U.S. state or local or non-U.S. Tax Law)
in applicable Tax Law for the manner in which Seller determines that such
Restructuring Item shall be treated or reported or for the positions with
respect to such Restructuring Item that Seller determines shall be taken in any
Tax Returns covering Pre-Closing Tax Periods or Straddle Periods or in any Tax
Matter. Purchaser shall not take, nor cause or permit any of its Affiliates
(including any Purchased Subsidiary) to take, any position on any Tax Return or
in any Tax Matter that is inconsistent with the manner in which Seller has
determined a Restructuring Item shall be treated, other than pursuant to a
Determination. If Purchaser reasonably determines in good faith that there is an
issue concerning whether there is such a reasonable basis for the manner in
which Seller has determined that a Restructuring Item shall be treated or
reported or for the positions with respect to such Restructuring Item that
Seller has determined shall be taken in any Tax Returns covering Pre-Closing Tax
Periods or Straddle Periods or in any Tax Matter, then (i) Purchaser shall
promptly consult with Seller, and the parties shall cooperate and negotiate in
good faith to resolve any disagreement concerning whether there is such a
reasonable basis therefore, and (ii) upon Purchaser's reasonable request in
writing made in connection with such consultation, Seller shall provide (at
Seller's cost and expense) no later than 60 calendar days following Seller's
receipt of such written request, an
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opinion or written advice of Tax counsel or Tax accountants of recognized
standing in the applicable taxing jurisdiction, reasonably acceptable in form
and substance to Purchaser, to the effect that there is such a reasonable basis
in applicable Tax Law for the manner in which the Seller has determined such
Restructuring Item will be treated or reported or such positions with respect to
such Restructuring Item.
(f) Tax Returns of the U.K. Purchased Subsidiaries shall be governed by the
procedures set forth in Schedule 17.4(f).
17.5. REFUNDS AND TAX BENEFITS:
(a) (i) All refunds or credits of Taxes (including interest thereon)
attributable to the Purchased Subsidiaries, the Business or the Target Assets
with respect to Pre-Closing Tax Periods (including, without limitation, refunds
or credits arising from amended Tax Returns filed after the Closing Date in
accordance with Section 17.8, refunds or credits allocated to Seller under
Section 17.6(b) and refunds of German Taxes relating to Pre-Closing Tax Periods
which certain Purchased Subsidiaries are entitled to receive after the Closing
Date) or attributable to any amount paid by Seller pursuant to this Article XVII
shall be for the account of Seller Group (collectively, "Seller's Refunds").
(ii) If any Seller's Refunds are received or used by Purchaser or any
of its Affiliates (including the Purchased Subsidiaries), including any Seller's
Refunds used by Purchaser or any Affiliate of Purchaser (including the Purchased
Subsidiaries) as an offset against its Tax liability (other than a liability of
Seller under Section 17.1(a)), Purchaser shall pay (or cause to be paid) to the
relevant member of Seller Group within ten Business Days of Purchaser's actual
receipt or actual use of Seller's Refunds the amount of such Seller's Refunds
(reduced by any Tax required under applicable Tax Law to be paid or withheld by
Purchaser or any of its Affiliates (including the Purchased Subsidiaries) with
respect thereto). Purchaser shall, at Seller's request and at the sole expense
of Seller, use its reasonable best efforts to obtain and expedite the receipt of
any Seller's Refunds. Purchaser and Seller shall treat, and shall cause their
respective Affiliates to treat, all Seller's Refunds as adjustments to purchase
price for all U.S. and non-U.S. Tax purposes, and Purchaser and Seller agree
that for purposes of Sections 3.3 and 17.2 such adjustments shall be allocated
to the relevant Purchased Assets in accordance with, and subject to, the
provisions of Sections 3.3 and 17.2.
(b) For avoidance of doubt, for purposes of this Agreement, including for
purposes of computing the respective amounts of Seller Indemnified Taxes and
Purchaser Indemnified Taxes, Seller and Purchaser agree that any and all losses,
credits, Reliefs, allowances or other similar Tax attributes of, or allocated
under applicable Tax Law to, the Purchased Subsidiaries arising in or
attributable to Pre-Closing Tax Periods (collectively, "Seller's Attributes")
shall, to the extent permitted by applicable Tax Law, be used first to offset
income, profits or gains of the Purchased Subsidiaries and their respective
Affiliates arising in or attributable to Pre-Closing Tax Periods, including such
income, profits or gains that are Restructuring Items or that arise in
Pre-Closing Tax Periods by reason of any settlements, resolutions or compromises
of any Tax Matters. Upon the earliest to occur of (a) the expiration of all
applicable statutes of limitations for all Pre-Closing Tax Periods with respect
to a taxing jurisdiction and a type of Tax (giving effect to any waivers,
mitigations or extensions of such statutes of limitations), (b) the final
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settlement, compromise or other resolution of all Tax Matters (whether pursuant
to Determinations, closing agreements or otherwise) with respect to all
Pre-Closing Tax Periods with respect to such taxing jurisdiction and type of
Tax, and (c) the complete closure to dispute by any taxing authority of all
Pre-Closing Tax Periods with respect to such taxing jurisdiction and type of
Tax, any unutilized portion of any Seller's Attributes with respect to such
taxing jurisdiction and type of Tax shall be fully available for use by
Purchaser and its Affiliates (including the Purchased Subsidiaries) in
Post-Closing Tax Periods.
(c) Purchaser shall, at the direction in writing of Seller, cause each
Purchased Subsidiary organized under the laws of a non-U.S. jurisdiction (each,
a "non-U.S. Purchased Subsidiary") to take all such steps as Seller may
reasonably require to:
(i) use and surrender in the manner hereinafter described all Reliefs
arising as a consequence of or by reference to any transaction, action or
omission occurring (or deemed to occur) on or before the Closing or in
respect of a Pre-Closing Tax Period, and not as a consequence of or by
reference to any transaction, action or omission occurring (or deemed to
occur) after the Closing or in respect of a Post-Closing Tax Period, as are
available to such non-U.S. Purchased Subsidiary (such Reliefs including,
without limitation, Reliefs made available to a company by means of a
surrender from another company), the said use being to effect the reduction
or elimination of any liability for Taxes to the extent specified by Seller
in a manner that is consistent with the provisions of Section 17.4(b) and
to the extent permitted by applicable Tax Law, and to provide to Seller, at
Seller's expense, a certificate from the auditors (for the time being) of
such non-U.S. Purchased Subsidiary confirming that all such Reliefs have
been so used;
(ii) make all such claims and elections specified by Seller, and in
particular that Purchaser will cause any Purchased Subsidiary organized
under the laws of the United Kingdom (a "U.K. Purchased Subsidiary") to
make all such claims and elections, including, without limitation,
surrenders of group relief as defined in Chapter IV of Part X of the U.K.
Income and Corporation Tax Act, 1988, as Seller may specify in a manner
that is consistent with the provisions of Section 17.4(b) in respect of any
accounting period of such U.K. Purchased Subsidiary beginning before the
Closing Date as have the effect of reducing or eliminating such liability
for Taxes as is mentioned in clause (i) of this Section 17.5(c), provided
that no such claim or election shall require such U.K. Purchased Subsidiary
to use or surrender any Relief which arises solely as a consequence of or
by reference to a transaction, action or omission occurring (or deemed to
occur) after the Closing or in respect of a Post-Closing Tax Period, and
provided further that Purchaser shall not be obliged to cause a U.K.
Purchased Subsidiary to use and/or surrender any such Reliefs under this
Section 17.5(c)(ii) to the extent such use or surrender would reasonably be
expected to, or would, increase such U.K. Purchased Subsidiary's liability
for Taxes with respect to a Post-Closing Period (except where such
increased liability for Taxes would arise solely as a result of any
Seller's Attributes not being available, in whole or in part, to be used or
surrendered in a Post-Closing Tax Period); and
(iii) allow Seller to reduce or eliminate any such liability for Taxes
as is mentioned in clause (i) of this Section 17.5(c) by surrendering, or
causing any non-U.S.
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Purchased Subsidiary or any Affiliate of Seller to surrender, any loss,
allowance or other amount available for surrender by or to such non-U.S.
Purchased Subsidiary or such Affiliate of Seller to the extent permitted by
applicable Tax Law but without any payment being made in consideration for
such surrender.
Seller shall reimburse Purchaser for the out-of-pocket professional fees
that Purchaser or its Affiliates may reasonably and properly incur to take
any action described in this Section 17.5(c) no later than 10 Business Days
of Seller's receipt of invoices and other materials describing in
reasonable detail the amount and nature of such fees.
(d) Except to the extent otherwise provided in this Article XVII and
subject to Section 17.5(e), neither Purchaser nor Seller shall, and neither
shall cause or permit any of the Purchased Subsidiaries or any of their
respective Affiliates to, make, amend, or revoke any Tax elections or claims
with respect to the Purchased Subsidiaries, the Target Assets or the Business in
a manner that would reasonably be expected to, or would, (i) increase the amount
of Taxes for which the other party is liable under this Article XVII or
otherwise result in adverse Tax consequences to the other party or its
Affiliates or (ii) reduce the amount of any Seller's Attributes or Seller's
Refunds, except pursuant to a Determination or except with the prior written
consent of the other party (which consent shall not be unreasonably withheld,
delayed or conditioned).
(e) Purchaser shall not, and shall not cause or permit any of the Purchased
Subsidiaries or any Affiliate of Purchaser to, carryback any net operating loss,
capital loss, Tax credit or other Tax attribute attributable to Purchaser, any
Affiliate of Purchaser or any Purchased Subsidiary from a Post-Closing Tax
Period into a Pre-Closing Tax Period of Seller or any Affiliate of Seller,
including any Purchased Subsidiary (a "Purchaser Carryback"), unless (i) Seller
shall have provided its prior written consent to such Purchaser Carryback or
(ii) such Purchaser Carryback is required (rather than being optional) under
applicable Tax Law and applicable Tax Law does not permit a waiver of such
requirement or a relinquishment of the carryback period as it relates to such
Purchaser Carryback (a "Mandatory Purchaser Carryback") (it being understood and
agreed by Purchaser that Purchaser shall provide or cause to be provided to
Seller written notice regarding such Mandatory Purchaser Carryback at least 30
calendar days prior to the filing of any Tax Return that reports or claims such
Mandatory Purchaser Carryback, which notice shall describe in reasonable detail
the nature and amount of such Mandatory Purchaser Carryback and such applicable
Tax Law). Seller's prior written consent to a Purchaser Carryback shall not be
unreasonably withheld or delayed, it being understood and agreed by Purchaser
that Seller shall have the absolute right in its sole discretion to withhold its
consent to any Purchaser Carryback if such Purchaser Carryback would reasonably
be expected to, or would, (i) result in an increase in the amount of Taxes for
which Seller is liable under Section 17.1(a), (ii) reduce the amount of any
Seller's Refunds or Seller's Attributes, or (iii) result in any adverse Tax
consequences to Seller or any Affiliate of Seller (including, with respect to
any Pre-Closing Period, any Purchased Subsidiary) (a "Seller Detriment"). In the
absence of Seller's prior written consent to any Purchaser Carryback, neither
Seller nor any of its Affiliates shall be required to pay to Purchaser, any of
the Purchased Subsidiaries or any of their Affiliates any refund or credit of
Taxes that results from such Purchaser Carryback. In the event Seller provides
its prior written consent to any Purchaser Carryback, Seller shall pay (or cause
to be paid) to Purchaser or the relevant Purchaser Designee
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(as applicable) within ten Business Days of the actual receipt or use of a
refund or credit of Taxes by Seller or any Affiliate of Seller that results from
such Purchaser Carryback the amount of such refund or credit (reduced by any Tax
required under applicable Tax Law to be paid or withheld by Seller or any of its
Affiliates with respect thereto). In the case of a Mandatory Purchaser Carryback
that actually gives rise to a Seller Detriment, Purchaser shall pay or cause to
be paid to Seller the amount of such Seller Detriment that does not exceed the
amount of the refund or credit of Taxes that actually results from such
Mandatory Purchaser Carryback (or if such refund or credit of Taxes is actually
received or used by Seller or any Affiliate of Seller, Seller or such Affiliate
shall not be required to pay to Purchaser or any Affiliate of Purchaser the
amount of such refund or credit that does not exceed the amount of such Seller
Detriment).
17.6. ALLOCATION OF TAXES ATTRIBUTABLE TO STRADDLE PERIODS:
(a) For purposes of this Agreement, including for purposes of computing the
respective amounts of Seller Indemnified Taxes and Purchaser Indemnified Taxes,
in the case of any Taxes that are imposed on a periodic basis and are payable
with respect to a Straddle Period, the amount of such Taxes and the amount of
any losses, credits, Reliefs, allowances or other similar Tax attributes of, or
allocated under applicable Tax Law to, a Purchased Subsidiary (as the case may
be) that are allocated to the Pre-Closing Tax Period with respect to such
Straddle Period shall (i) in the case of any Income Taxes and any sales, use,
transfer, transfer gains, employment, payroll and other similar Taxes which are
based on or related to sales, proceeds, receipts or disbursements, be deemed
equal to the amount which would be payable or the amount of such losses,
credits, Reliefs, allowances or other similar Tax attributes of, or allocated
under applicable Tax Law to, a Purchased Subsidiary (as the case may be) if the
relevant Straddle Period ended on the Closing Date for applicable Tax purposes
(for avoidance of doubt, except as otherwise provided in Section 17.7), and (ii)
in the case of all other such Taxes (including real and personal property Taxes
and franchise Taxes that are not income Taxes) be deemed to be the amount of
such Taxes payable or the amount of any losses, credits, Reliefs, allowances or
other similar Tax attributes of, or allocated under applicable Tax Law to, a
Purchased Subsidiary (as the case may be) for the entire Straddle Period
multiplied by a fraction the numerator of which is the number of calendar days
in that portion of the Straddle Period ending on the Closing Date and the
denominator of which is the number of calendar days in the entire Straddle
Period. For avoidance of doubt, for purposes of clause (i) of the preceding
sentence, items of income, profit, gain, loss and deduction shall be allocated
to the day on which they arise or are otherwise recognized for applicable Tax
purposes.
(b) Subject to Section 17.5(a)(i), any refunds of Taxes or credits of Taxes
in lieu of refunds of Taxes relating to a Straddle Period shall be allocated to
Seller in amount equal to the excess of (i) the sum of the amount of such Taxes
paid by Seller or the Purchased Subsidiaries prior to the Closing Date with
respect to such Straddle Period and the amount of such Taxes paid by Seller to
Purchaser after the Closing Date under this Article XVII relating to the
Pre-Closing Tax Period with respect to such Straddle Period, over (ii) the
amount of such Taxes that are allocated to the Pre-Closing Tax Period with
respect to such Straddle Period pursuant to subsection (a) of this Section 17.6.
(c) Earnings and profits for a Straddle Period shall be allocated in a
manner consistent with subsection (a) of this Section 17.6.
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(d) All determinations necessary to give effect to the allocations under
this Section 17.6 shall be made in a manner consistent with the prior practice
of the Purchased Subsidiaries and shall be based on the information used to
determine the EBITDA Amount and Stated Net Book Value.
17.7. TRANSFER TAXES: Except as otherwise provided in this Agreement, (i) all
transfer, transfer gains, documentary, sales, use, stamp, registration,
conveyance and other similar Taxes and fees (including penalties, interest and
additions to tax attributable thereto and costs and expenses relating to such
Taxes), other than any such Taxes resulting from or arising out of the
Multi-stage Closing, (collectively, "Transfer Taxes") incurred in connection
with consummation of the transactions contemplated by this Agreement shall be
borne 50% by Purchaser and 50% by Seller, and (ii) Purchaser shall prepare and
timely file all applicable Tax Returns and other documentation with respect to
such Transfer Taxes (including, for this purpose, any such Taxes resulting from
or arising out of the Multi-stage Closing) in accordance with applicable Tax
Laws, shall timely remit all Transfer Taxes to the appropriate Tax authority and
shall provide such Tax Returns and other documentation to Seller no later than
seven Business Days prior to the due date (including extensions thereof) for
such Tax Returns and other documentation for Seller's review and approval (which
approval shall not be unreasonably withheld, delayed or conditioned).
17.8. TAX CONTESTS:
(a) Each of Purchaser and Seller shall notify the other party in writing
within 15 Business Days of the receipt by Purchaser or Seller, as the case may
be, or any of its Affiliates (including, with respect to Purchaser, the
Purchased Subsidiaries) of written notice of any pending or proposed Tax Matter
(as defined below) that may affect the Tax liabilities of the Purchased
Subsidiaries for which the other party would be liable in whole or in part under
Section 17.1 or any pending or proposed Tax Matter concerning Transfer Taxes or
value added Taxes with respect to the Target Assets. Such notice shall contain
factual information (to the extent known) describing any asserted Tax liability
in reasonable detail and shall be accompanied by copies of any notice and other
documents received from any Tax authority in respect of such Tax Matter. A
party's failure to give such notice to the other party as provided herein shall
not affect the other party's liabilities under Section 17.1 except to the extent
that the other party is materially prejudiced thereby.
(b) Except with respect to the U.K. Purchased Subsidiaries to which the
provisions of Section 17.8(e) shall apply, Seller shall have the exclusive right
to conduct and control any matter, including any audit, review, claim,
assessment, examination or administrative or judicial proceeding or the filing
of any amended Tax Return or claim for Tax refund or Tax credit (a "Tax Matter")
relating to any Tax Return or Taxes of or with respect to the Business, the
Purchased Subsidiaries or the Target Assets for any Pre-Closing Tax Period
(other than any Pre-Closing Tax Period of a Straddle Period), including without
limitation, the exclusive right to represent the Purchased Subsidiaries'
interests in any such Tax Matter and to resolve, settle, concede, compromise or
contest any deficiency or adjustment proposed, asserted or assessed in
connection with or as a result of such Tax Matter; provided, however, that (i)
Seller shall not, and shall not cause or permit any U.S. Purchased Subsidiary or
any Affiliate of Seller to, settle, concede or compromise any such Tax Matter
relating to a U.S. Purchased Subsidiary or file an
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amended Tax Return or claim for Tax refund or Tax credit relating to a U.S.
Purchased Subsidiary in a manner that either (x) would reasonably be expected to
increase, or would increase, the Taxes for which Purchaser or any of its
Affiliates (including a U.S. Purchased Subsidiary) would be liable under Section
17.1(b) or (y) would have binding effect on Purchaser or any of its Affiliates
(including a U.S. Purchased Subsidiary) in a Post-Closing Tax Period, in the
case of clause (x) or clause (y), without prior written consent of Purchaser,
which consent shall not be unreasonably withheld, delayed or conditioned, (ii)
Seller shall not, and shall not cause or permit any non-U.S. Purchased
Subsidiary or any Affiliate of Seller to, settle, concede or compromise any such
Tax Matter relating to a non-U.S. Purchased Subsidiary or file an amended Tax
Return or claim for Tax refund or Tax credit relating to a non-U.S. Purchased
Subsidiary without prior written consent of Purchaser, which consent shall not
be unreasonably withheld, delayed or conditioned, and (iii) Purchaser shall be
entitled to participate in the conduct of any Tax Matter relating to a non-U.S.
Purchased Subsidiary or PMV Inc.; provided, however, that Purchaser's
participation in any aspect of any such Tax Matter shall not, under any
circumstances, require the disclosure of any Tax Return relating to a
Pre-Closing Tax Period of a Consolidated Group which includes Seller or any
Affiliate of Seller other than the Purchased Subsidiaries, or any work papers or
documents relating thereto. Purchaser shall cooperate fully, and shall cause its
Affiliates and the Purchased Subsidiaries to cooperate fully, with Seller and
its counsel in the conduct, defense or settlement of any such Tax Matter,
including by executing and delivering (or causing to be executed and delivered)
to Seller or its designees all instruments (including, without limitation,
powers of attorney) reasonably requested by Seller in order to implement the
provisions of this Section 17.8(b). Purchaser shall not, and shall not cause or
permit the Purchased Subsidiaries or any Affiliate of Purchaser to, settle,
concede or compromise any such Tax Matter without the prior written consent of
Seller. Except as provided in clause (c) below with respect to Straddle Periods,
Purchaser shall have the exclusive right to conduct and control any Tax Matter
relating to any Tax Return or Taxes of or with respect to the Business, the
Purchased Subsidiaries or the Target Assets for any Post-Closing Period;
provided, however, that if such Tax Matter would reasonably be expected to
increase, or would increase, the Taxes for which Seller would be liable under
Section 17.1(a), Purchaser shall not, and shall not cause or permit any
Affiliate of Purchaser (including any Purchased Subsidiary) to, settle, concede
or compromise any such Tax Matter without prior written consent of Seller, which
consent shall not be unreasonably withheld, delayed or conditioned.
(c) Subject to Section 17.4(e), in the case of a Tax Matter involving a Tax
liability or potential Tax liability relating to a Straddle Period (a "Joint
Tax"), if the amount of the Joint Tax relating to the Pre-Closing Tax Period is
equal to 50% or more of the total amount of the Joint Tax, Seller shall elect
either to conduct such Tax Matter or to tender the conduct of such Tax Matter to
Purchaser. If Seller tenders the conduct of such Tax Matter to Purchaser and
Purchaser declines to conduct such Tax Matter, then Seller will conduct such Tax
Matter. If the amount of the Joint Tax relating to the Pre-Closing Tax Period is
less than 50% of the Joint Tax, Purchaser shall elect either to conduct such Tax
Matter or to tender the conduct of such Tax Matter to Seller. If Purchaser
tenders the conduct of such Tax Matter to Seller and Seller declines to conduct
such Tax Matter, then Purchaser will conduct such Tax Matter. The party
conducting a Tax Matter relating to a Joint Tax shall control the conduct of
such Tax Matter, provided that the other party shall have the right to
participate in such Tax Matter at its own expense, and provided further that
neither party shall, and neither party shall cause or permit any
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of its Affiliates or a Purchased Subsidiary to, settle, concede or compromise a
Joint Tax without the prior written consent of the other party, which consent
shall not be unreasonably withheld, delayed or conditioned. Except as provided
in the preceding sentence, all of the costs of the conduct of a Tax Matter
relating to a Joint Tax shall be shared between Seller and Purchaser based on
the proportionate amount of such Joint Tax that is ultimately assessed (or, if
such Joint Tax is not ultimately assessed, the proportionate amount of such
Joint Tax that was contested in such Tax Matter) that relates to the portion of
such Straddle Period ending on the Closing Date and the portion thereof
beginning after the Closing Date.
(d) Any Tax Matter relating to Transfer Taxes or value added Taxes with
respect to the Target Assets shall be jointly controlled and conducted by Seller
and Purchaser, and neither party shall, and neither party shall cause or permit
any of its Affiliates or any Purchased Subsidiary to, settle, concede or
compromise any such Tax Matter without the prior written consent of the other
party, which consent shall not be unreasonably withheld, delayed or conditioned.
(e) Except as otherwise provided in Section 17.8(d), Tax Matters with
respect to the U.K. Purchased Subsidiaries shall be governed by the provisions
of Schedule 17.8(e).
17.9. OTHER TAX COVENANTS:
(a) Any and all Tax sharing agreements, tax indemnity agreements and
practices among or between the Purchased Subsidiaries on the one hand and any
members of the Seller Group or any Affiliates of the Seller Group on the other
hand shall be terminated as of the Closing Date and no payments relating thereto
shall be made subsequent to the Closing Date and no rights or liabilities shall
survive thereunder.
(b) All powers of attorney authorizing any party to represent any of the
Purchased Subsidiaries with respect to Taxes shall be terminated on or before
the Closing Date.
(c) Each Purchased Subsidiary organized under the laws of a state in the
United States, other than Worcester Controls Licensco Inc. and PMV Inc., shall
immediately prior to the Closing be a U.S. LLC that is classified as an entity
disregarded as separate from its sole owner under section 301.7701-3(b)(1) of
the U.S. Treasury Regulations (and any applicable analogous or comparable
provisions of United States state or local Tax Law).
(d) Seller and Purchaser shall (and shall cause their respective
Affiliates, including the Purchased Subsidiaries, to) treat the purchase and
sale of the interest in each U.S. LLC, as a purchase and sale of all the assets
of such U.S. LLC, subject to all of the Assumed Liabilities of such U.S. LLC,
for United States federal Tax purposes (and for applicable United States state
and local Tax purposes), and shall not take (or cause or permit any of their
respective Affiliates, including the Purchased Subsidiaries, to take) any
position inconsistent with such treatment in any Tax Return or Tax Matter,
except to the extent required pursuant to a Determination.
17.10. COOPERATION:
(a) Prior to the Closing Date, Seller shall, and shall cause its
subsidiaries, officers, employees and other representatives to, afford to
Purchaser and its representatives reasonable
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access, during normal business hours and in a manner that is not unreasonably
disruptive to the operations of the Business or the business of Seller and its
subsidiaries, to the Tax Returns (or portions of Tax Returns of any affiliated,
consolidated, combined, unitary or similar group which includes Seller or any
Affiliate of Seller (other than any of the Purchased Subsidiaries)) together
with accompanying schedules and related workpapers, books, records, documents
and other materials regarding Taxes and Tax positions insofar as they relate
solely to the Purchased Subsidiaries or the Target Assets. During such period,
(i) Seller shall provide to Purchaser schedules setting forth the information
described in Schedule 17.10(a), such schedules to be provided no later than 10
calendar days prior to the Closing (and, at Purchaser's written request, Seller
shall deliver or make available to Purchaser as promptly as practicable any
agreements or documents referred to in such schedules); (ii) Seller shall, and
shall cause its subsidiaries, officers, employees and representatives to,
deliver or make available as promptly as practicable to Purchaser all other
information concerning Taxes or Tax positions insofar as such information
relates solely to the Purchased Subsidiaries or the Target Assets as Purchaser
may from time to time reasonably request in writing; and (iii) Seller shall, and
shall cause its subsidiaries to, make employees available on a mutually
convenient basis to provide additional information and explanations of any
materials provided hereunder as Purchaser may from time to time reasonably
request in writing. Prior to the Closing Date, at Purchaser's written request,
Seller shall, and shall cause the relevant Purchased Subsidiaries to, reasonably
cooperate with Purchaser to facilitate the Tax planning objectives of Purchaser
with respect to PMV, Inc. and any additional costs reasonably and properly
incurred by Seller, any Affiliate of Seller or any Purchased Subsidiary and any
additional Taxes payable by Seller, any Affiliate of Seller or any Purchased
Subsidiary (including, without limitation, any such Taxes arising out of or
resulting from any reduction to Seller's Attributes, Seller's Refunds or any
losses, credits, Reliefs, allowances or other similar Tax attributes of Seller
or any Affiliate of Seller) as a result of such cooperation or any actions or
transactions undertaken by Seller, any Affiliate of Seller or any Purchased
Subsidiary in connection with such cooperation, shall be for the account of
Purchaser and shall be treated as a Tax subject to indemnification by Purchaser
under Section 17.1(b). Purchaser will hold, and will cause its directors,
officers, employees, accountants, counsel, financial advisors and other
representatives and Affiliates, successors and assigns to hold, any nonpublic
information in confidence to the extent required by, and in accordance with, the
provisions of the Confidentiality Agreement.
(b) From and after the Closing Date, as and to the extent reasonably
requested by the other party, Seller Group and Purchaser shall, and Purchaser
shall cause its Affiliates and the Purchased Subsidiaries to, assist and
cooperate fully with the other party and its Affiliates in connection with the
preparation and filing of any Tax Returns pursuant to Section 17.4, any Tax
Returns and other documentation relating to Transfer Taxes, the Section
338(h)(10) Elections, the determination of Tax Benefits, the determination of a
liability for Taxes or a right to a refund or credit of Taxes or Reliefs with
respect to the Purchased Subsidiaries or the Target Assets relating to Tax years
or periods beginning before the Closing Date, and the preparation and conduct of
any Tax Matter relating to Tax years or periods beginning before the Closing
Date. Such cooperation shall include, without limitation, the retention and,
upon the other party's request, the provision of Tax Returns, information,
records and documents reasonably relevant to the activities described in the
preceding sentence and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder. Purchaser shall, and shall cause the Purchased Subsidiaries to, (i)
retain all
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books and records with respect to Taxes pertinent to the Purchased Subsidiaries
relating to any taxable year or period beginning before the Closing Date until
the expiration of the statute of limitations (including any extensions thereof)
of the respective taxable years or periods, and to abide by all record retention
agreements entered into with any taxing authority, and (ii) give Seller
reasonable written notice prior to transferring, destroying, discarding any such
books and records and, if Seller requests, allow Seller to take possession of
such books and records.
(c) Notwithstanding anything to the contrary in this Agreement, Seller and
its Affiliates shall not under any circumstances be required to disclose to
Purchaser or any of its Affiliates (or any of their respective representatives)
any Tax Returns or portions of any Tax Returns (including accompanying schedules
and related workpapers), books, records, documents or other materials or
information regarding Taxes that do not relate solely to the Purchased
Subsidiaries or the Target Assets.
(d) Except as otherwise provided in this Article XVII, each party shall
reimburse the other party for the out-of-pocket professional fees that the other
party or any of the other party's Affiliates may reasonably and properly incur
from and after the Closing Date to satisfy the other party's obligations under
this Section 17.10 no later than 10 Business Days after the first party's
receipt of invoices and other materials describing in reasonable detail the
amount and nature of such fees.
(e) For purposes of this Agreement:
"Actual Taxation Liability" means, with respect to a U.K. Purchased
Subsidiary, a liability of such U.K. Purchased Subsidiary or an increase in a
liability of such U.K. Purchased Subsidiary to make an actual payment of or of
an amount in respect of Tax, whether or not such Tax is also or alternatively
chargeable against or attributable to any other person and whether or not such
liability or increased liability is discharged prior to Closing.
"Deemed Taxation Liability" means the setting off of a Post-Closing Relief
against an Actual Taxation Liability of a UK Purchased Subsidiary in respect of
which the Seller would have been liable under section 17.1(a) or, as the case
may be, against income, profits or gains which would have given rise to such
liability (in which event the amount of the liability is in the former case the
amount of the Actual Taxation Liability eliminated by such setting off and in
the latter case the amount of the Actual Taxation Liability which would have
arisen but for such setting off).
"Income Taxes" means all Taxes (x) based upon, measured by, or calculated
with respect to, net income or net receipts, proceeds or profits, or (y) based
upon, measured by, or calculated with respect to multiple bases (including, but
not limited to, corporate franchise and occupation Taxes) if such Tax may be
based upon, measured by, or calculated with respect to one or more bases
described in clause (x) above.
"Post-Closing Tax Period" means any taxable year or period that begins
after the Closing Date and, with respect to any Straddle Period, the portion of
such Straddle Period beginning after the Closing Date.
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"Pre-Closing Tax Period" means any taxable year or period that ends on or
before the Closing Date and, with respect to any Straddle Period, the portion of
such Straddle Period ending on and including the Closing Date.
"Reliefs" means any relief, allowance, exemption, set-off or credit in
respect of any non-U.S. Tax or any deduction in computing income, profits, or
gains for the purposes of any non-U.S. Tax.
"Restructuring Item" means any item of income, gain, loss, deduction,
credit or other item relating to Taxes resulting from, arising out of or related
to the Cash Extraction Plan, the Divestiture or the arrangements described in
Section 4.3(d)(i).
"Straddle Period" means any taxable year or period that begins before the
Closing Date and ends after the Closing Date.
"Tax" or "Taxes" means (A) all taxes, assessments, charges, duties, fees,
levies or other governmental charges, including income, estimated, gross income,
gross receipts, profits, capital stock, franchise, withholding, payroll, social
security, workers compensation, unemployment, disability, property, ad valorem,
stamp, excise, severance, occupation, service, sales, use, excise, transfer,
import, export, value added, alternative minimum, estimated and all other taxes
of whatever nature imposed by any government or any political subdivision,
agency, commission or authority thereof, and any interest, penalties, additions
to tax or additional amounts in respect of the foregoing and (B) any liability
for payment of any amount described in clause (A) as a result of any contractual
obligation or being a transferee, successor or a member of an affiliated,
combined or unitary group for purposes of any Tax.
"Tax Affiliate" means any entity (other than any Purchased Subsidiary) that
is a member of an affiliated group of corporations (within the meaning of
Section 1504(a) of the Code) filing a consolidated U.S. federal Income Tax
Return or a group of corporations filing a consolidated, combined, affiliated ,
aggregate or unitary Tax Return for state, local or non-U.S. Tax purposes (each,
a "Consolidated Group"), if any of the Purchased Subsidiaries could be held
liable for the Taxes of such entity or of such Consolidated Group pursuant to
U.S Treasury Regulations Section 1.1502-6 (or any analogous provision of
applicable U.S. state or local or non-U.S. Tax Law).
"Tax Law" means any statute, law, code, rule, regulation or treaty (as
modified by the relevant taxing authority's practice with respect thereto or
application or official interpretation thereof) relating to Taxes.
"Tax Return" means any return, report, declaration, claim for refund or
credit, or information return or statement relating to Taxes, including any
schedules or attachments thereto, and including any amendments or supplements
thereto.
"U.K. Accounts" means the audited accounts for each U.K. Purchased
Subsidiary for the accounting period ended on the U.K. Accounts Date.
"U.K. Accounts Date" means 31st March 2000.
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"U.S. Treasury Regulations" means the Treasury regulations promulgated
under the Code.
ARTICLE XVIII.
Miscellaneous
18.1. BROKER COMPENSATION: Each of the parties hereto agrees to indemnify the
other against and hold the other harmless from any and all liabilities
(including, without limitation, cost of legal fees in defending against such
liabilities) for brokerage commissions or finder's fees in connection with the
transactions contemplated by this Agreement, insofar as such claims shall be
based on arrangements or agreements made or claimed to have been made by or on
behalf of Seller and its Affiliates or Purchaser and its Affiliates,
respectively. Seller shall pay the fee of J.P. Morgan Securities Inc. for their
services in connection with the transactions contemplated by this Agreement.
18.2. BULK SALES ACT: Purchaser waives compliance by the Seller Group with any
bulk sales law which may be applicable to the transactions contemplated by this
Agreement; provided, however, that Seller agrees to indemnify Purchaser and hold
it harmless from any loss, damage, liability, and expenses (including reasonable
legal fees) resulting from such noncompliance.
18.3. EXPENSES: Each of the parties hereto shall pay its own expenses in
connection with the negotiation and preparation of this Agreement and the
Related Documents; provided that Seller shall pay all expenses of the Business
in connection with the negotiation, execution and delivery of this Agreement.
18.4. BINDING AGREEMENT: This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
provided that neither party shall assign this Agreement without the prior
written consent of the other party hereto, except Purchaser may assign its
rights under this Agreement, in whole or in part, (i) to an Affiliate and (ii)
as collateral security for obligations of Purchaser and its Affiliates, each
without Seller's consent, provided that in no event will any assignment relieve
the assigning party of its obligations hereunder; and provided further, that
Seller shall have no greater liability under this Agreement following any
assignment of this Agreement than it would have had in the absence of such
assignment.
18.5. ENTIRE AGREEMENT: This Agreement (including the Exhibits and Schedules
hereto, the Confidentiality Agreement, the Escrow Agreement, the Non-Competition
Agreement, the Stamp Duty Deed and, at such time as entered into, the Transition
Services Agreement, the Conveyance Instruments and the Transfer Agreements) (a)
constitutes the entire agreement between the parties hereto with respect to the
purchase and sale of the Purchased Assets and the other transactions
contemplated hereby, (b) supersedes all prior negotiations and oral or written
understandings, if any, and (c) may not be amended or supplemented except by an
instrument in writing signed by both parties hereto. Neither party makes any
representation or warranty except as provided herein.
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18.6. GOVERNING LAW: This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of New York, United States of
America, without regard to its choice of law provisions.
18.7. NO RIGHTS OF THIRD PARTIES: Nothing in this Agreement is intended to
confer any right on any person other than the parties to it and their respective
successors and assigns; nor is anything in this Agreement intended to modify or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third person any right of
subrogation or action over against any party to this Agreement. Without limiting
the generality of the foregoing, no employee (whether former, current or future)
of either Purchaser, Seller or any Purchased Subsidiary (or any beneficiary
thereof) shall be treated as a third party beneficiary or have any rights or
interests hereunder.
18.8. COUNTERPARTS: This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18.9. HEADINGS: The headings of the sections of this Agreement and the table of
contents at the forepart of this Agreement are inserted for convenience only and
shall not constitute a part hereof nor affect the rights of the parties hereto.
18.10. TERMINATION; TERMINATION EVENTS; NOTICE OF TERMINATION:
(a) Anything contained herein to the contrary notwithstanding, this
Agreement may be terminated and the transactions contemplated hereby abandoned
under any of the following circumstances:
(i) by the mutual written consent of Seller and Purchaser at any time
prior to the Closing Date;
(ii) by Seller if any of the conditions set forth in Article XI shall
have become incapable of fulfillment at any time or are not fulfilled at
Closing and shall not have been waived by Seller;
(iii) by Purchaser if any of the conditions set forth in Article X
shall have become incapable of fulfillment at any time or are not fulfilled
at Closing and shall not have been waived by Purchaser;
(iv) by either party if the Closing has not occurred by the close of
business on July 31, 2002, other than as a result of the breach of this
Agreement by the party seeking to so terminate this Agreement; or
(v) by Purchaser, after June 15, 2002 if Purchaser shall not have
obtained the funds contemplated in the Commitment Letters, other than as a
result of the breach of Section 7.4 of this Agreement by Purchaser.
(b) In the event of termination of this Agreement by Seller or Purchaser
pursuant to this Section 18.10, written notice thereof shall be given to the
other party and the transactions
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contemplated by this Agreement shall be abandoned, without further action by any
party. If the transactions contemplated by this Agreement are abandoned as
provided herein:
(i) Purchaser shall return all documents and copies and other
materials received from or on behalf of Seller relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof, to Seller;
(ii) all confidential information received by Purchaser with respect
to the Business shall be treated in accordance with the Confidentiality
Agreement, which shall remain in full force and effect notwithstanding the
termination of this Agreement; and
(iii) this Agreement shall become void and of no further force and
effect, except for the provisions of (i) Section 15.3 relating to the
obligations of each of Purchaser and Seller to keep confidential certain
information and data obtained by it, (ii) Section 7.5 relating to
publicity, (iii) Section 18.3 relating to certain expenses, (iv) Section
18.1 relating to broker's or finder's fees, and (v) this Section 18.10.
Nothing in this Section 18.10 shall be deemed to release any party from any
liability for any breach by such of the terms and provisions of this
Agreement occurring prior to termination of this Agreement.
(c) If Purchaser exercises its right to terminate this Agreement pursuant
to Section 18.10(a)(v), then Purchaser shall pay to Seller upon demand, $20
million, as payment of liquidated damages and not as a penalty, to reimburse
Seller for its time, expense and lost opportunity costs of pursuing the
transactions contemplated by this Agreement. The parties hereto understand and
agree that $20 million is reasonable as liquidated damages in light of the costs
and expenses that would be incurred by the Seller of such a termination were to
occur, and in light of the difficulty of proving the amount of actual damages
that would be suffered by the Seller in such an event. Anything else in this
Agreement to the contrary notwithstanding, the remedy provided by this Section
18.10(c) shall be Seller's sole remedy and recourse against Purchaser in the
event Purchaser terminates this Agreement pursuant to Section 18.10(a)(v).
18.11. DISPUTE RESOLUTION; NEGOTIATION; JURISDICTION:
(a) In the event of any dispute or disagreement between Seller and
Purchaser as to the interpretation of any provision of this Agreement, the
performance of obligations hereunder, or any other disputed matter, such matter,
upon written request of either party, shall be referred to representatives of
the parties for decision, each party being represented by a senior executive
officer who has no direct operational responsibility for the matters
contemplated by this Agreement (the "Representatives"). The Representatives
shall promptly meet in a good faith effort to resolve the dispute. If the
Representatives do not agree upon a decision within thirty (30) calendar days
after reference of the matter to them, either Purchaser or Seller shall be free
to exercise all remedies otherwise available to them.
(b) Subject to Section 18.11(c), each of the parties agrees that any
dispute, controversy or claim arising out of or in connection with this
Agreement or any alleged breach hereof shall be referred to the United States
District Court for the Southern District of New York of any courts of the State
of New York sitting in the City of New York, Borough of
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Manhattan pursuant to its rules and procedures. Either party may bring an action
in such Court and the other party shall hereby be deemed to have consented to
personal jurisdiction within the State of New York for such purpose and the
jurisdiction of such Court and its rules, and hereby waives any defense to any
such action based on the doctrine of forum non-conveniens.
(c) Nothing in this Section 18.11 shall prevent either party from
commencing proceedings against the other in any other court of competent
jurisdiction where the relief claimed in such proceedings is or includes a bona
fide claim for an injunction or other form of order restraining the defendant
from doing any act or thing, and whether such order is temporary or interim or
permanent.
18.12. SPECIFIC PERFORMANCE: The parties recognize that in the event that either
party should refuse to perform under any of the provisions of this Agreement,
money damages alone would not be adequate. The parties shall therefore be
entitled, in addition to any other remedies to which they are entitled at law or
in equity, including money damages, to obtain specific performance of such
provisions. In the event of any action to enforce such provisions specifically,
the parties hereby waive the defense that there is adequate remedy at law.
18.13. REPRESENTATION BY COUNSEL; INTERPRETATION: Seller and Purchaser
acknowledge that each of them has been represented by counsel in connection with
this Agreement and the transactions contemplated hereby. Accordingly, any rule
of law or any legal decision that would require interpretation of any claimed
ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived.
18.14. KNOWLEDGE OF SELLER: The term "Knowledge" as used with respect to Seller
in this Agreement means actual knowledge of the individuals listed on Schedule
18.14.
18.15. DOLLAR AMOUNTS: All dollar amounts referred to in this Agreement are in
United States Dollars.
18.16. PASSAGE OF TITLE AND RISK OF LOSS: Legal title, equitable title and risk
of loss with respect to the Target Assets, the Purchased Subsidiaries and the
assets of the Purchased Subsidiaries will not pass to Purchaser until such
assets and subsidiaries are transferred to Purchaser or its Designees.
18.17. WAIVER: Any party may, by written notice to another party: (a) extend the
time for the performance of any of the obligations or other actions of such
other party; (b) waive any inaccuracies in the representations of such other
party contained in this Agreement; (c) waive any condition to its obligations
set forth in Article X or XI, as applicable; or (d) waive compliance of any of
the agreements of such other party contained in this Agreement or waiver or
consent to the modification of performance of any of the obligations of such
other party. No action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representation, warranty, condition, or agreement contained herein. The failure
in any one or more instances of a party to insist upon performance of any of the
terms, covenants or conditions of this Agreement, to exercise any right or
privilege in this Agreement conferred, or the waiver by said party of any breach
of any of the terms, covenants or conditions of
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this Agreement shall not be construed as, or constitute a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect.
18.18. SEVERABILITY: If any provision of this Agreement shall finally be
determined to be unlawful, then such provision will be deemed to be severed from
this Agreement and replaced by a lawful provision which carries out, as closely
as possible, the intention of the parties and preserves the economic bargain
contemplated by this Agreement, and, in such case, each and every other
provision of this Agreement will remain in full force and effect.
18.19. WAIVER OF JURY TRIAL: SELLER AND PURCHASER HEREBY IRREVOCABLE WAIVE, TO
THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
INVENSYS PLC
By: /s/ John Saunders
------------------
Name: John Saunders
Title:
FLOWSERVE CORPORATION
By:/s/ Ronald F. Shuff
---------------------
Name: Ronald F. Shuff
Title:
EXECUTION COPY
PURCHASE AND SALE AGREEMENT
Dated as of March 21, 2002
Between
Invensys plc
and
Flowserve Corporation
TABLE OF CONTENTS
PURCHASE AND SALE AGREEMENT..............................................1
ARTICLE I. Purchase and Sale.............................................2
ARTICLE II. Liabilities..................................................4
ARTICLE III. Purchase Price..............................................6
ARTICLE IV. Purchase Price Adjustments..................................12
ARTICLE V. Closing Matters..............................................21
ARTICLE VI. Transfer After the Closing..................................23
ARTICLE VII. Actions Prior to Closing...................................25
ARTICLE VIII. Representations and Warranties of Seller..................33
ARTICLE IX. Representations and Warranties of Purchaser.................54
ARTICLE X. Conditions to Obligations of Purchaser.......................55
ARTICLE XI. Conditions to Obligations of Seller.........................57
ARTICLE XII. Employee Matters...........................................58
ARTICLE XIII. Obligations After Closing.................................66
ARTICLE XIV. Notices....................................................68
ARTICLE XV. Further Covenants...........................................69
ARTICLE XVI. Survival of Representations and Warranties and
Indemnification...........................................72
ARTICLE XVII. Tax Matters...............................................80
ARTICLE XVIII. Miscellaneous...........................................101
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DEFINITIONS
The following terms which appear in this Agreement are defined in the
following Sections:
Term Section or Other Location
Actual Taxation Liability.............................................17.10(e)
ADSP...................................................................17.2(b)
ADSP Allocation........................................................17.2(b)
ADSP Computation.......................................................17.2(b)
Affiliate...............................................................1.1(b)
Agreement.............................................................Preamble
APC-T&K Litigation.............................................Schedule 2.2(h)
Asbestos Claims............................................................2.2
Assigned Contracts.........................................Schedule 1.1(a)(ii)
Assumed Liabilities........................................................2.1
Auditors...............................................................17.1(e)
Australian Benefit Plan................................................12.7(c)
Australian Business Employee...........................................12.7(e)
Australian Superannuation Arrangements.................................12.7(a)
Balance Sheet.............................................................8.14
Balance Sheet Principles................................................4.3(d)
Basket Amount.............................................................16.4
Benefit Entitlements..............................................12.7(e)(iii)
Benefit Plans..........................................................8.10(a)
Business..............................................................Recitals
Business Benefit Plan..................................................8.10(a)
Business Day............................................................3.4(d)
Business Divisions.........................................Schedule 1.1(a)(ii)
Business Employees.....................................................8.10(a)
Business Joint Ventures....................................................6.3
Business Purchasers...................................................Recitals
CAA2001...............................................................17.10(d)
Cap....................................................................16.4(a)
Cash.................................................................4.4(b)(i)
Cash/Debt Notice of Disagreement........................................4.4(f)
Cash Extraction Plan......................................................7.15
Cash Purchase Price........................................................3.1
Change.............................................................16.6(c)(iv)
Claim...................................................................1.1(b)
Claimant...............................................................17.1(e)
Closing.................................................................5.1(a)
Closing Date............................................................5.1(a)
Closing Payment.........................................................3.2(b)
COBRA..................................................................8.10(i)
Code...................................................................8.10(a)
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Collective Bargaining Agreements.......................................8.10(a)
Commercially Reasonable Manner......................................16.6(c)(i)
Commitment Letters.........................................................9.2
Competition Approvals.....................................................10.3
Computer Systems.......................................................8.11(f)
Confidentiality Agreement..................................................7.1
Consolidated Group....................................................17.10(d)
control.................................................................1.1(b)
Controlled Group Liability.............................................12.4(a)
Conveyance Instruments..................................................5.1(c)
December Financial Statements........................................4.1(b)(i)
Deemed Taxation Liability.............................................17.10(e)
Determination..........................................................17.2(a)
Divestiture...............................................................7.15
EBITDA..................................................................4.2(a)
EBITDA Notice of Disagreement...........................................4.2(h)
EBITDA Purchase Price Adjustment........................................4.2(e)
Encumbrances............................................................1.1(b)
Enterprise.........................................................17.4(e)(iv)
Environmental Claim.................................................16.6(d)(i)
Environmental Laws.....................................................8.13(a)
Environmental Liabilities..............................................8.13(b)
Environmental Permits..................................................8.13(c)
ERISA..................................................................8.10(a)
ERISA Affiliate........................................................8.10(a)
Event.................................................................17.10(d)
Escrow Agreement...........................................................7.7
Excluded Assets............................................................1.2
Final Allocation........................................................3.3(c)
Final Cash/Overdraft Debt Balance..................................4.4(b)(iii)
Financial Statements.......................................................8.4
Final Inter-Company Report..............................................3.4(e)
Foreign Benefit Plan...................................................8.10(f)
Foreign Business Benefit Plan..........................................8.10(f)
Former Employees.......................................................8.10(a)
Gestra Lease.........................................................4.3(d)(i)
Gestra Sublease..........................................................7.17
Governmental Authority....................................................8.3
Guarantor/Non-Guarantor Information......................................7.14
Hazardous Substances...................................................8.13(b)
HSR Act...................................................................10.3
IFC Australasia........................................................12.7(a)
IFCB......................................................................8.29
IFCB Financial Statements.................................................8.29
Income Taxes..........................................................17.10(e)
Indemnified Environmental Costs....................................16.6(a)(ii)
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Indemnified Off-Site Environmental Costs............................16.6(a)(i)
Indemnified Party......................................................17.1(e)
Indemnifying Party.....................................................17.1(e)
Indemnitee.............................................................16.5(a)
Indemnitor.............................................................16.5(a)
Indemnity Claim........................................................17.1(e)
Independent Firm........................................................3.3(e)
Inter-Company Notice of Disagreement....................................3.4(d)
Inter-Company Payables..................................................3.4(m)
Inter-Company Receivables...............................................3.4(m)
Inter-Company Report....................................................3.4(m)
Inter-Company Trading Accounts............................................15.7
Interest Rate..........................................................12.3(b)
Interim Period.........................................................12.3(b)
Invensys Group..........................................................3.4(m)
Investment Plan........................................................12.3(c)
Joint Tax..............................................................17.8(c)
Joint Venture Interests....................................................6.3
Judgment...................................................................8.8
Knowledge................................................................18.14
Leased Real Property....................................................8.5(b)
Leases..................................................................8.5(b)
Limitorque Indemnity....................................................2.1(j)
LLC Allocation..........................................................3.3(c)
Losses.................................................................16.2(a)
LRA.......................................................................12.5
Mandatory Purchaser Carryback..........................................17.5(e)
Master Trust...........................................................12.3(b)
Material Adverse Effect....................................................8.2
Material Contracts......................................................8.7(a)
Multi-Stage Closing.....................................................5.1(h)
Net Book Value..........................................................4.3(c)
Net Book Value Adjusted Purchase Price..................................4.3(e)
Net Book Value Notice of Disagreement...................................4.3(i)
Net Book Value Statement................................................4.3(a)
Net Inter-Company Payables Amount.......................................3.4(m)
Non-Competition Agreement...............................................5.1(f)
Non-Qualified Plans....................................................12.3(a)
non-U.S. Purchased Subsidiary..........................................17.5(c)
Notice of Claim........................................................16.5(a)
NYSE.......................................................................7.5
Overdraft Debt......................................................4.4(b)(ii)
Owned Real Property.....................................................8.5(a)
PCB Claims.................................................................2.2
Permits.................................................................8.9(b)
Permitted Liens.....................................................5.1(c)(ii)
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Permitted Owned Real Property Exceptions................................8.5(a)
person..................................................................1.1(b)
Personal Property..........................................................8.6
Post-Closing Tax Period...............................................17.10(e)
Pre-Closing Tax Period................................................17.10(e)
Previous Fund..........................................................12.7(e)
Post-Closing Relief...................................................17.10(d)
Preliminary Allocation..................................................3.3(a)
Previous Fund.........................................................12.14(f)
Proceedings.............................................................8.5(e)
Products................................................................2.1(e)
Purchase Price.............................................................3.1
Purchased Assets.........................................................1.1(b)
Purchased Inventories.......................................Schedule 1.1(a)(ii)
Purchased Receivables.......................................Schedule 1.1(a)(ii)
Purchased Records..........................................................13.1
Purchased Subsidiaries......................................................8.2
Purchased Subsidiary Assets.................................................6.2
Purchaser..............................................................Preamble
Purchaser 401(k) Plan...................................................12.3(c)
Purchaser Carryback.....................................................17.5(e)
Purchaser Designees....................................................Recitals
Purchaser Indemnified Taxes.............................................17.1(b)
Purchaser Information...................................................15.3(c)
Purchaser Material Adverse Effect...........................................9.3
Purchaser's Fund........................................................12.7(e)
Purchaser's Relief.....................................................17.10(e)
Qualifying Events.......................................................12.2(f)
Real Property............................................................8.5(b)
Records....................................................................7.12
Reference Financial Statement Principles.................................4.2(d)
Reference Balance Sheet..................................................4.3(d)
Reference Financial Statements...........................................4.2(a)
Reference Income Statement...............................................4.2(c)
Reference Income Statement Principles....................................4.2(d)
Regulations.............................................................12.6(b)
Related Documents...........................................................8.1
Reliefs................................................................17.10(e)
Representatives........................................................18.11(a)
Restructuring Item.....................................................17.10(e)
Restructuring Provision..............................................4.4(b)(iv)
Retained Liabilities........................................................2.2
Retained Names...........................................................1.2(e)
Retained Tax Liabilities.................................................2.2(a)
Rockwell.................................................................2.1(k)
Rockwell Addendum........................................................2.1(k)
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SA VAT..............................................................17.4(c)(iv)
Section 338(h)(10) Elections............................................17.2(a)
Seller.................................................................Preamble
Seller Benefit Plan.....................................................8.10(a)
Seller Detriment........................................................17.5(e)
Seller Group...........................................................Recitals
Seller Indemnified Taxes................................................17.1(a)
Seller Information......................................................15.3(b)
Seller Intellectual Property............................................8.11(c)
Seller's Attributes.....................................................17.5(b)
Seller's Refunds.....................................................17.5(a)(i)
Share Purchasers.......................................................Recitals
Short-Term Rate.........................................................12.5(b)
South African Employees....................................................12.5
Stamp Duty Allocation....................................................3.3(b)
Stamp Duty Deed..........................................................5.1(i)
Stated EBITDA............................................................4.2(a)
Stated Net Book Value....................................................4.3(a)
Statement of EBITDA......................................................4.2(a)
Statement of Final Cash/Overdraft Debt Balance..........................4..4(e)
Straddle Period........................................................17.10(e)
Target Assets..........................................................Recitals
Target Subsidiaries....................................................Recitals
Tax or Taxes...........................................................17.10(e)
Tax Affiliate..........................................................17.10(e)
Tax Benefit.............................................................17.1(e)
Tax Cost................................................................17.1(e)
Tax Law................................................................17.10(e)
Tax Matter..............................................................17.8(b)
Tax Return.............................................................17.10(b)
TCGA...................................................................17.10(d)
Third Party Claim.......................................................16.5(b)
Threshold...........................................................16.6(b)(iv)
Transfer Agreements......................................................7.2(c)
Transfer Taxes............................................................17.7
Transferred Employees...................................................12.2(a)
Transferred Obligations...................................................12.11
Transition Services Agreement...............................................7.9
Treaty......................................................................7.8
U.K. Accounts..........................................................17.10(e)
U.K. Accounts Date.....................................................17.10(e)
U.K. Accounts Relief...................................................17.10(e)
U.K. Business and Assets...........................................17.4(c)(iii)
U.K. Business Employees.................................................12.6(a)
U.K. GAAP...................................................................8.4
U.K. Purchased Subsidiary...........................................17.5(c)(ii)
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U.K. Subsidiary.........................................................8.15(b)
U.K. Transferred Employees.................................................12.3
U.K. Taxation Liability................................................17.10(d)
U.K. VAT............................................................17.4(c)(ii)
U.S. Bargaining Pension Plan............................................12.3(b)
U.S. Bargaining Plan Asset Value........................................12.3(b)
U.S. Benefit Plans......................................................8.10(a)
U.S. Business Employees....................................................12.3
U.S. GAAP...................................................................8.4
U.S. LLC.................................................................7.3(c)
U.S. Salaried Pension Plan..............................................12.3(a)
U.S. Transferred Employees.................................................12.3
Valuation Date..........................................................12.3(b)
VAT Act.............................................................17.4(c)(iv)
VAT Amount..........................................................17.4(c)( v)
VATA...................................................................17.10(d)
WCL.....................................................................17.2(a)
Welfare Benefits........................................................12.2(f)
Year End Balance Sheet...................................................4.1(a)
Year End Financial Statements............................................4.1(a)
Year End Profit and Loss Account.........................................4.1(a)
116 Certificate.............................................................7.7
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